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New Year's Resolution:

Improve Your Credit Score

As we prepare for the new year, now is the perfect time to reflect on our financial habits and set goals for improvement. One crucial aspect of your overall fiscal health is your credit. Your credit score is a critical factor in determining your financial well-being, impacting your ability to be approved for loans, buy a home, or even land a job in some cases. If improving your credit is one of your financial resolutions for the upcoming year, we are here to help with some tips to guide you on your journey to better credit.


Pay Down Debt
One of the most effective ways to boost your credit score is to reduce the outstanding balances on your credit card and other loans. High debt balances in proportion to your credit limits can negatively affect your credit utilization ratio (a key factor in your credit score calculation).

Set your sights on paying off high-interest debts first. If you have multiple credit cards or loans, consider a consolidation loan to combine several balances to a lower-interest option with only one monthly payment. Debt consolidation not only improves your credit score but also saves you more money on interest in the long run. As a result, you can put that extra money towards your other financial resolutions!

LMFCU personal /bill consolidation loan rates are as low as 8.89% annual percentage rate.

Dispute Any Errors
Periodically reviewing your credit report is an essential step to improving your credit. It allows you to identify and correct any errors that may be dragging down your score. Mistakes in your credit report are more common than you may think. These can include anything from inaccurately reported late payments to accounts that don’t even belong to you. If you notice any discrepancies in your report, dispute them with the credit bureaus immediately. Doing so will ensure that your credit report accurately reflects your financial history.

While there are many apps and websites that offer access to your credit score, few display your entire report. To obtain a free copy of your credit report annually, visit www.AnnualCreditReport.com

Request a Credit Limit Increase
A credit limit is the maximum amount you can borrow on a revolving line of credit. For example, if your credit limit on a credit card is $5,000, you can spend up to $5,000.
Asking for a credit limit increase can reduce your overall credit utilization and positively impact your credit score. Lower credit utilization signals to creditors that you can manage credit responsibly. This strategy is most effective when you maintain or, better yet, decrease your spending upon being approved for the limit increase.

Pay On Time
Paying your bills on time is a fundamental aspect of maintaining good credit. Late payments, especially when made a habit, can cause significant damage to your credit score. Consider setting up automatic payments or payment reminders to avoid missing due dates or incurring late fees. Consistent on-time payments demonstrate financial responsibility to lenders and positively contribute to your payment history, another critical factor in your credit score calculation.

Add to Your Credit Mix
Credit scoring models consider the variety of different credit accounts you have, such as credit cards, auto loans, mortgages, etc. A diverse credit mix can have a positive effect on your credit score. Consider adding a different type of credit account to your portfolio if it makes sense for your current financial situation. But remember, it is essential to use this credit responsibly to see the desired improvement in your score.

Keep Old Accounts Open
The length of your credit history is another factor influencing your credit score. Closing old credit accounts can shorten your credit history and negatively impact your score. Even if you’re not actively using an old credit card, consider keeping it open anyway to allow it to preserve the length of your credit history and strengthen your credit profile.

Only Borrow When Necessary
Credit card companies constantly try to lure you into opening a new card with rewards and the promise of other perks. While these offers can be attractive, you should only open new loans or credit cards when necessary. First, new loans invite the opportunity for more debt, which can drop your score. Secondly, a hard inquiry will appear on your credit report whenever you apply for a loan and lower your score slightly. If you apply for multiple loans or credit cards in a short period, it can lead lenders to believe you are in financial trouble.

We’re Here to Help!
Improving your credit score is not a feat you can accomplish overnight but rather a gradual process requiring consistent effort and financial responsibility. By incorporating these tips into your financial routine, you can set yourself on the path to better credit and improved well-being in the new year. Remember, building credit is not just about the number of your score - it’s about cultivating healthy financial habits that will last throughout the year and your lifetime.

If you want to learn more about how debt consolidation can help you eliminate high-interest debt, we’re prepared to help. Please stop by the Credit Union or call 800-410-0501 to speak with a Loan Specialist today.

Each individual’s financial situation is unique and readers are encouraged to contact the Credit Union when seeking financial advice on the products and services discussed. This article is for educational purposes only; the authors assume no legal responsibility for the completeness or accuracy of the contents.