If you kicked off January determined to improve your financial situation but don't know where to start, look to your credit score first. Financial New Year's resolutions are wonderful, but they can also be overwhelming—especially if you set an extreme goal
for yourself. The good news is that improving your credit score doesn't have to mean slugging through months of hard work. These four easy tips will help you improve your score without the stress.
1. Check Your Credit Report Regularly
If your goal is to improve your credit score in 2021, you need to be checking your credit report frequently. This is not only to track your progress, but to make sure there aren't any mistakes on your report. This has been especially important during the pandemic. The CARES Act specifies that lenders should report your account as paid in full if you are covered under a hardship agreement (the exception to this is if you were delinquent prior to the hardship agreement). Until the end of April, you can get a free credit report every week from each credit bureau. After April, many banks and credit card companies offer free credit score tracking.
2. Establish Credit
If you look into your score and notice you have a lower score due to a lack of established credit, work on building your credit history
in 2021. Building credit normally requires taking out a loan or opening up a credit card account. This can be easier said than done if you have bad credit or no credit. Look for credit cards marketed to people who want to build their credit. Secured credit cards
are a great way to do this. You deposit your own money to create a line of credit that you can then use like a credit card. After a year or so of on time payments, you should be eligible for a regular credit card or loan.
3. Ask For a Limit Increase
Increasing your credit limit can help reduce your credit utilization ratio, which in turn will boost your credit score. If you already have a credit card, ask to increase the limit on these accounts before you start applying for additional credit cards. An increase on an existing line of credit can help you gain credit without lowering your length of credit history: the older your accounts, the better your credit score.
4. Be Careful When Applying for New Credit
Whenever you apply for credit, there is a hard inquiry on your credit report. This normally decreases your score by a few points. A few points here and there isn't going to impact your score too dramatically, but too many hard inquiries can cause significant damage to your credit score. Be selective about the credit cards you apply for. If you are applying for a mortgage or a loan and shopping around for the best deal, don't worry: you have a 45 day window during which all hard inquires will be counted as a single entry.
Your credit score goals will be unique to your specific financial situation. If you are looking to build your credit or repair your credit after financial missteps
, Veitengruber Law can provide customized solutions to help you achieve your 2021 financial goals.