Understanding and Improving Your Credit Score

Understanding and Improving Your Credit Score

Have you ever struggled with a low credit score despite your best efforts? You’re not alone. Maintaining a good credit score involves more than just paying bills on time and keeping a low credit utilization rate. Various factors influence your credit score, and it’s easy to harm it unknowingly.

This guide from Boom Community Bank covers many surprising factors that can negatively impact your credit score. Let's dive in!

Credit Card Spending

Balance vs. Limit

Two critical numbers affect your credit score: your balance and your limit. Using credit cards sensibly, staying within limits, and making timely payments can positively impact your score.

Importance of Sensible Use

Overspending harms your credit score. Always keep credit card spending under control.

Utility Bills

Reporting to Credit Agencies

Many utility companies report payment records to major credit agencies. Late payments can harm your credit score.

Impact of Missed Payments

Consistent late payments can severely damage your credit score.

Applying for More Credit

Hard Checks vs. Soft Checks

Applying for credit can result in a hard check, temporarily lowering your score. Soft checks, like pre-approval offers, don’t affect your score.

Effects of Credit Requests

Approved credit requests can improve your score, while denied requests can have the opposite effect.

Credit Diversity

Importance of Different Credit Types

Managing various credit types positively influences your score.

Long-term Strategy

Build a diverse credit mix over time, not all at once.

Guarantor Loans

Responsibilities and Risks

Acting as a guarantor can affect your credit report and score if the primary borrower defaults.

Impact on Credit Report

Guarantor loans appear on your credit report, affecting your score.

Ignoring Your Credit Report

Common Errors

Lender reporting mistakes can negatively impact your credit score.

Importance of Regular Checks

Regularly review your credit report to catch and correct errors.

Late Payments

Consequences

Late payments can significantly lower your credit score.

Strategies to Avoid Them

Set up reminders or automatic payments to avoid missed due dates.

High Credit Utilization Ratio

Optimal Utilization Rates

Aim to keep your credit utilization ratio below 30%.

Management Tips

Regularly pay down balances and avoid maxing out your credit cards.

Closing Old Accounts

Impact on Credit History Length

Closing old accounts can shorten your credit history and lower your score.

Considerations Before Closing Accounts

Consider how closing accounts will affect your score. Keeping old accounts open can be beneficial.

Frequent Credit Inquiries

Difference Between Hard and Soft Inquiries

Hard inquiries for loans or credit applications can lower your score. Soft inquiries do not.

Managing Credit Applications

Limit the number of credit applications to minimize hard inquiries.

Public Records and Collections

Types of Public Records

Bankruptcies, liens, and judgments can significantly damage your score.

Effects on Credit Score

Accounts sent to collections negatively impact your score. Pay off debts before they reach this stage.

Joint Accounts

Shared Responsibilities

Missed payments on joint accounts affect all account holders’ credit scores.

Potential Risks

Understand the risks before opening a joint account.

FAQs

What is a good credit score range?

A good credit score typically ranges from 670 to 739. Scores above this are considered very good or excellent.

How often should I check my credit report?

Check your credit report at least once a year. You can get a free report from each of the three major credit bureaus annually.

Can Boom Community Bank help you?

If you find yourself with a poor credit score due to any of the previously mentioned factors, it doesn’t mean you’re entirely excluded from obtaining additional credit. However, it may restrict your options. This is where Boom Community Bank can step in to help.

We are dedicated to offering affordable credit solutions to people who have less-than-ideal credit scores.

To find out more about our services contact us or click here and apply for a loan today.