As we celebrate Nusenda Credit Union’s 90th anniversary, we're sharing 90 tips and tricks throughout the year to strengthen our members' financial well-being. This article will explore strategies to jump-start your credit score. Read on to learn more!
- Consider setting up auto pay to ensure timely payments
If there’s one "golden rule" of credit, it’s this: pay on time, every time. Your payment history makes up a whopping 35% of your score. Even a single missed payment can stick around on your report for years. Setting up automatic payments is a lifesaver for making sure you never miss a due date.
Try your best to pay your credit card balance in full each month to avoid interest charges. If your budget is tight, always pay at least the minimum. Consistent, on-time habits are the fastest way to prove to lenders that you’re a pro at managing your finances.
- Limit applications for new credit sources
This one can be hard, because if you’re looking to gain or improve your credit, you may be applying for new cards. However, every time a lender performs a “hard credit pull,” it impacts your score. While one pull shouldn’t affect your score too much, multiple pulls in a short amount of time will. Make sure you are discriminating about when to apply for credit.
- Monitor your credit reports and learn about your right to dispute inaccurate information
If you notice charges on your credit card that you don’t agree with, it could be due to identity theft or errors on the account itself. These inaccuracies can negatively impact your credit score. If you see inaccurate information, contact the relevant credit bureau immediately to avoid potential damage to your score:
Equifax: 866-349-5191
Experian: 888-397-3742
TransUnion: 800-916-8800
For more information, you can also visit the Consumer Financial Protection Bureau.
- Diversify your credit
As with investing, it’s smart to use diversification in your favor when it comes to credit cards. Lenders look at many factors when it comes to awarding you a credit score. The more diverse your credit is, the better. For example, if you only have credit cards right now, consider getting an auto or mortgage loan, too. Often your loans will become more diversified as you hit different milestones in your life (such as buying a new house), but you can apply for a credit-builder loan if you want to start diversifying now. Just be cautious not to take on too much debt in your attempts to build credit!
- Consider a debt consolidation loan or balance-transfer credit card to help with a large debt
Debt consolidation allows you to combine all your debts into one payment by taking out a new loan, ideally with a lower interest rate, and using it to pay off your debts. Be careful, though – you could end up being in debt longer because of the new loan and thus paying more interest overall.
- Meet with a credit counselor to work out a debt-management plan
Why not meet with an expert to help you navigate the complicated terrain of credit? At Nusenda, you have options! Visit one of our branches to meet with a Financial Consultant. Although walk-ins are welcome at any time, we do recommend you make an appointment for your consultation. You can also check out our resource, Banzai Get Out of Debt Coach, which can help you make a customized plan to pay off your debt and learn more about what some of these strategies could look like for you.
- Familiarize yourself with the ways that closing out cards can negatively impact your credit
A good rule of thumb is to keep your oldest account open. The reason this is recommended is because length of credit history is important in determining your score. So instead of closing an old card, consider using it every so often or paying a small, recurring bill through the account. You can also contact your card company and see if they will let you upgrade the card to one that works better for you. Just remember that closing an old credit line can significantly damage your score.
- Consider becoming an authorized user on a card belonging to a parent or other financially stable loved one
Also known as the “piggybacking method,” this strategy helps you establish a credit history through a more financially stable person’s credit. You “inherit” their positive payment history while building credit, bypassing the need to pass a credit check. Just make sure you establish ground rules with the other party and be extra conscientious of always making your payments to avoid fees on this joint card.
- Look into ways to get credit for bills you always pay in full and on time, like rent or utilities.
There are a few different tactics you can employ for this one. One is to use a credit card to pay small bills, like a recurring utility bill. Another is to use the free Experian Boost tool to factor your punctual bill-payment history for phone, utilities, and internet into your credit score. Lastly, you could try a rent-reporting service to report on-time rent payments.
And there you have it! Try using one (or all!) of the above tips to improve your credit score. Another useful tool is Nusenda Credit Union’s Credit Score tool, which can help you gain insight into your current standing regarding debt. Simply log into Mobile and Internet Banking to view your credit score, report, payment history, and more. You can also check out our website and social media for even more helpful information.
At Nusenda, we’re dedicated to improving our members’ financial well-being and supporting them through affordable products, friendly service, community involvement, and financial education. We'd love to find other ways to help you reach your financial goals. You can call us at 505-889-7755 (800-347-2838 outside the Albuquerque area) or make an appointment to meet with us at any of our branch locations.