If your credit score isn't as high as you'd like it to be, getting that number in check should be a priority. The truth is that a killer score can save you serious money in the long run. (The interest rates you'll pay on everything from auto loans to credit cards to home loans are all directly impacted by your score.)
"Your credit score helps anyone issuing you a line of credit understand how responsibly you'll use debt and what the likelihood of you paying that debt is," says Benjamin Sullivan, a certified financial planner with Palisades Hudson Financial Group in Scarsdale, N.Y. "A score above 700 usually suggests good credit management. So if yours is below 700, you really want to try and take proactive steps to improve your credit score."
Looking to bump your credit score to the next level? Read on for some of Sullivan's top tips.
KEEP YOUR CREDIT UTILIZATION LOW
Maxing out your credit cards is a great way to drag down your credit score. Instead, Sullivan suggests keeping your utilization below 30 percent of the available credit. One great little hack is to make multiple credit card payments per month.
For example, most of us get paid twice a month. Instead of waiting until the due date to pay your credit card, pay half in the middle of the month and half at the end of the month. Making double payments will help bring down your credit utilization faster.
"If you're holding credit card balances on an ongoing basis, that'll reduce the interest you're paying as well," adds Sullivan.
DON'T CLOSE YOUR OLDER ACCOUNTS
In some cases, closing out accounts can actually negatively impact your score.
"If it's one of your oldest cards, you definitely want to keep that one open because the average age of your credit history matters," says Sullivan, adding that the longer your credit history is, the better. "So you want to keep that older card open on your credit report."
If it's a more recent card, Sullivan says that closing it isn't a bad idea—especially if that credit card is going to be a temptation.
DO MORE THAN JUST PAY ON TIME
The secret behind elevating your credit score is being patient and consistent with all of your payments. That means never missing one. (Like, ever.) If you have multiple credit cards, Sullivan suggests tackling the one with the highest interest first, while continuing to make the minimum payments on the others.
"The key is to just make those on-time payments and illustrate to the creditors that you have responsible use of debt," he says. "Setting up auto-payments is a great way to make sure you don't miss any payments accidentally."
Just make certain that you always have enough funds in our bank account to cover the bill.
CHECK YOUR CREDIT REPORT
Be sure to keep an eye on your credit report. Erroneous accounts or forgotten-about bills that have been sent to collections can seriously hold down your credit score.
"I recommend getting a free credit report from each credit reporting agency once per year," says Sullivan. "Some people like to look at one of them every four months, which gives you periodic insight into what's on your credit report."
Sullivan recommends Credit Karma. You can also pull your report at AnnualCreditReport.com, which provides one free report per year from each credit bureau.
DON'T BE SO FAST TO OPEN NEW LINES OF CREDIT
According to Sullivan, people need to be cautious of opening new credit cards.
"When you walk into a store and they ask you if you'd like to save 10 percent by opening a credit card, it's important to understand that opening new store credit cards to try and save a few dollars on a purchase can wind up costing you quite a bit in the long run," he says.
This is because when you open a new account, it reduces the average age of the accounts on your credit report. It also shows a new inquiry for additional credit, which can ultimately lower your score.