The simple fact is that even small improvements to your credit score can mean big savings, as low credit scores result in much higher costs for things like credit card debt, home loans and so forth. In fact, for people who have a FICO credit score of 700 or more, the average savings are nearly $650 a year on credit card fees, $1400 a year on their car loan and almost $2400 on their mortgage.
With that in mind, we’ve put together a number of waste that you can increase your credit score in 2014 and take advantage of the extra money that having a good FICO credit score brings. Enjoy.
1) Pay down your credit card debt as quickly as possible
Your FICO credit score will almost always drop it if you surpass a credit utilization ratio of 10%. So, for example, if you have $10,000 in credit card credit, you should not surpass $1000 in debt on those cards at any time or else you will pass that 10% line. This can occur even if you pay off your credit card balance in full every month.
2) Consider converting your credit card debt to personal loans
If you’re having problems paying down all of your debt, you might consider rolling that that into a personal loan. The credit utilization ratio actually doesn’t take installment debt into account when it’s formulated and, if you can transfer that CC debt to a personal loan, you could easily boost your credit score by 100 points or more.
3) When accelerating your debt payments, be as selected as possible
Many people look at paying off their student loans or a car loan more quickly as something positive and, while it is, paying down credit card debt first is actually a smarter financial move. The reason is simply because credit card debt is actually worse for your FICO credit score than other types of consumer loans. Also, interest payments can be deducted on things like a home mortgage whereas on credit card debt they cannot.
4) Make sure to check your credit reports as often as possible
Did you know that 1 in 5 consumers has some type of error on at least one of their three major credit reports? Out of those people, nearly 15% had errors that have impacted their credit score and approximately 5% had errors that kept them from being approved for new credit. Simply put, checking your credit report often, taking advantage of the free credit report you are allowed every year by federal law and keeping tabs on your report are vital to keeping your credit score healthy.
5) Pay your bills on time
This can’t be said enough. One of the quickest and easiest ways to damage your credit score is simply to miss a payment. Even worse, that one single payment will stay on your report for upwards of 7 years! If there’s one thing that will keep your credit score looking good, it’s paying your bills on time, all the time.