You already know your credit score matters. But what can you do to change it? And what should you definitely not do? Carolyn Zigmund tackles tips and tricks to help you stay on track.

You’re probably already familiar with credit score basics. You may know that FICO is the most popular credit-scoring model. You may know that 300 is the lowest number and 850 is the highest.  And where you fall in that span affects your credit worthiness.  But here are some things you may not know.

The higher your credit score, the better rate you’ll get on everything from college and car loans to mortgages and travel reward credit cards. If you’re buying your first condo and have a high credit score of 760 to 850, you could end up paying $300 to $600 less each month on your mortgage—more than $108,000 over the course of a 30-year loan—than you would with a score on the low side of 620 to 639. Did you know your score could also affect your hireability? It’s true. These days, more and more employers review your credit report, particularly if you’re in the banking, finance, or government agency fields.

So, what do you do if you have a lousy credit score?  Are you doomed for all time?  Absolutely not.  In fact, upping your credit score is not as hard as you might think. Just follow these proven steps:

Twice is nice: Most Grownups are good at paying their credit card balance every month. But an even better idea is to make two payments per month. Making one right before your card’s statement closing date helps reduce the balance that gets reported to the credit bureaus. Making the second before the due date helps you avoid late fees and extra interest.

Auto-pay starting today: The best way not to miss or make a late payment? Put it out of your mind altogether. By setting up automatic monthly payments, you don’t have to rely on your brain to remember dates and you don’t have to worry about getting hit with late fees, extra interest, or losing credit score points.

Keep your cards close to your vest: Just because you’re not using a credit card doesn’t mean you should close it. That only reduces the amount of credit you have available. In the same way, you want to keep your older accounts open because it shows your length of payment history, and that makes up 15 percent of your score. An easy way to keep a little-used older card open is to make one small purchase a month.

Don’t put all your eggs in one credit card basket: If you currently have all credit card accounts, it’s a good idea to diversify. Creditors are looking for your ability to pay off different types of loans like installments (mortgage, car, and furniture loans) and revolving credit (home equity lines of credit and credit cards).

Piggyback on someone else’s good credit: Call it the “Halo Effect.” When a relative with good credit adds you as an authorized user to their account—even if it’s in name only—it could improve your own score.

Now that you have a better idea of how to improve your score, don’t be sidetracked by these myths.

Checking your credit hurts your score: Despite what you may have heard from other well-meaning sources, checking your own credit doesn’t affect your score. If, however, you ask someone at the bank or auto dealership to pull your report for you, that could negatively affect your score.

You must carry a credit card balance: Carrying unpaid balances does not show your credit history. A better approach is to make a small purchase every month on your card and pay it off in full.

Bankruptcy will ruin your credit. Period: While a bankruptcy can stay on your credit report for up to 10 years and a foreclosure seven years, what’s important is what you do afterwards. Paying your bills consistently and on time is the key.

An employer can’t check your credit: A potential employer actually can pull a credit report on you with your permission and use it to spot financial habits that could negatively affect your work.

While it’s easy to blame credit cards for debt and low FICO scores, being more knowledgeable about how you use credit does come with some unexpected perks. Did you know you can use your credit card to…

  • Save on car rental insurance: When paying for your rental, use your credit card and decline the collision damage waiver insurance. Your card will cover any damage or theft that occurs.
  • Get roadside help: A lot of credit card companies will send a tow truck if you need emergency roadside assistance for things like a flat tire.
  • Extend your warranty: If you pay for your electronics, appliances, jewelry, or furniture with your credit card, you could get an extra year of coverage. 
  • Get the VIP treatment: Many cards now offer complimentary concierge services. It’s like having a personal assistant that will make dinner reservations for you or score tickets to a sold-out show, all without requiring a tip.

With these tips and tricks, paying down your debt and upping your credit score is easier than you think. And, if you use your credit card wisely—for its perks vs. its temptations—you may just find that plastic is your friend and your FICO score earns you financial bragging rights.

Sources:

Are you currently taking advantage of some credit card perks? Spread the word in the comments section below!

Carolyn Zigmund is an award-winning freelance creative director and journalist, whose credits include Backpacker Magazine and The Chicago Tribune. Her portfolio can be found at Carolyn Zigmund.com. She lives with her husband Michael and daughter Poppy near Boston.

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