UFCU SPONSORED CONTENT — In 2020, the average credit score for Texans was 688, which translates to a “good” FICO® Score. No matter your number, read on to learn six simple steps you can take to bulk up your score.
1. Knowledge Is Power
The first step in your regimen is to find out your number. The three major credit bureaus (TransUnion, Experian, Equifax) offer credit reports, but you may have to pay to see your score. Some credit-card companies offer a free annual credit report that includes your score, so ask your institution if this is something you can get.
Once you’ve got your score, understand what it means. The FICO® Score range translates to these values:
- Less than 580 = Poor
- 580–669 = Fair
- 670–739 = Good
- 740–799 = Very Good
- 800–850 = Exceptional
2. Keep An Eye On Your Balance
A best practice for credit cards is to pay your outstanding balance in full at the end of your billing cycle to avoid interest. Only make purchases on your credit card that you can afford to pay off immediately. When this isn’t possible, limit your balance to less than 30 percent of the total credit available. The closer you get to paying off the balance — and having more unused credit — the more your score will improve.
PlanU Tip: You have a 25-day grace period from when you make a purchase to when you are charged interest. Always try to pay off your balance within that 25-day grace period.
3. Pay Down Your Debt
If you continue using the card, pay off any new charges within the 25-day grace period. Resist adding to the overall balance. Next, figure out how you can pay off the outstanding amount. One idea is to transfer the full balance to a card with a lower interest rate — some cards even have 0 percent rates for a set amount of months. Read the fine print in advance to understand the transfer policies and any fees. Make a plan to get your balance to less than 30 percent of your available credit, and then down to $0.
4. Always Pay On Time
Always pay your bills on time. A payment that is late by even one day hurts your score. This is the most important thing you can do to improve and maintain your score.
5. The Older, The Better
One factor that impacts your credit score is how long you’ve had credit. The older your credit history is, the better your score. Keep your oldest accounts open even if you no longer use that card and have a $0 balance. As long as you aren’t being charged an annual fee, it doesn’t hurt you to keep those cards open. You’ll be doing your credit score a favor.
6. Variety Is Key
It’s a good idea to diversify your debt types. Rather than putting car payment, tuition, and home improvements on a credit card, consider applying for goal-specific loans. For example, these can include a car loan, a student loan, and a line of credit. Diverse loans show lenders that you can handle the responsibility of paying back different types of debt. But don’t open them all at once — your credit score can be lowered if you open or apply for several new loans in a short time period.
If you’re looking for additional financial tips and tools to better plan, spend, save, and borrow, check out PlanU by UFCU. You’ll find options that range from talking with a financial health expert to creating a personalized resource center to meet your needs.