Those 3 Not So Little Numbers…Does Your Credit Score Need an Adjustment?

No one likes to think about financial planning when the holidays are here, but the end of the year is one of the prime periods to start preparing for next year’s financial goals.

While saving more money and paying off your credit card balances are typically on the “to-do” list, bumping up your credit score should also be prioritized. This is especially true for savers, as a high credit score will translate into more savings in the way of lower interest rates and better loan terms.

There are several actions you can take now to start shoring up your three-digit credit rating, and the first, as always, is to check your credit score and report.

While you may have to pay to obtain a copy of your credit score, you are entitled to one free credit report each year from each of the three credit bureaus – Equifax, Experian and TransUnion. You can access these reports by going to annualcreditreport.com. Once you have your reports in hand, it’s time to take the right steps toward a better score.

1. Dispute errors
   You may be surprised to find that the credit card bill you paid off in full is still showing a balance on your credit report, or that there is an account listed in your file that is not yours. Credit mistakes are more common than many realize, and may be dragging down your credit score unfairly. If you find errors, make a copy of your report, circle the error in red pen and send that – along with any supporting documentation – to the lender that incorrectly reported it and the credit bureau listing the mistake. By law, they must investigate the matter within 30 days. You may see a bump in your score once the mistake is wiped clean.
2. Automate your bills
   Late payments are the fastest way to drag down your rating. When you’re living on the go and caffeine is the only thing keeping you sane, its easy to miss a payment here and there. But your lenders won’t see it that way. To avoid late bills, automate your payments through your bank or lender.
3. Pay down your balances
   You may think that maxing out your credit cards won’t affect your score if you pay off the balance, but this is not always the case. Carrying high balances suggests to lenders that you may be irresponsible with or reliant on credit, and this sentiment shows in your credit score. Consider that you credit utilization rate – the ratio of your revolving debt balances to your total available credit – makes up 30 percent of your FICO score! So the next time you go to swipe your card, check your balance first. Ideally, it’s the best to avoid using more than 30 percent of your available credit limit.