Tips to Improve Your Credit Score Every Oklahoman Should Know
07/11/2024
Tips to Improve Your Credit Score Every Oklahoman Should Know
Your credit score is the foundation of your finances. From loan approval to interest rates, jobs, rental homes, and more, improving your credit score can help you achieve financial stability and obtain the best possible loan terms. While there are multiple credit scoring models, most range from 500-800, with higher numbers being better. Factors like payment history, age of accounts, and credit utilization can hurt or help your score depending on how you handle debt and bills. Keep reading to learn why a good credit score is important and the steps you can take to improve your score.
How can raising my credit score help me?
There are many benefits to improving your credit score. Having a better credit score can save you money in the short and long term, as well as open up options limited to people with higher credit scores. Let’s look at five important things a better credit score can help you with.
Save On Interest
The average new car price in Oklahoma was $34,876 in 2023. With the current average interest rate on a new car loan hovering around 6.73%, you’d pay about $6,300 in interest over a five-year loan term. With an excellent credit score, you might be able to lower your car loan rate by 1% or so, which could save you about $1,000 in interest over the life of the loan.
Your credit score also impacts the interest rate you qualify for on your mortgage loan. With the average mortgage interest rate currently around 6-7% depending on loan term, an excellent credit score will help you qualify for the best possible rate.
As you can see, improving your credit score can help you save money by getting the best possible interest rate on your next loan. Use our loan calculator to see how different rates could affect the total amount of interest you pay.
Better Credit Cards
As with car and home loans, your credit score also determines the type of credit card you can qualify for, including better interest rates, rewards, and higher credit limits.
Loan Approval
Beyond just the rate itself, getting approved for a loan at all (mortgage, auto, and more) can be determined by your credit score. At a certain point, your credit score can be too low to get approved for credit cards and term loans.
Employment
When you apply for a new job, your prospective employer may check your credit report as part of a background check. Bankruptcy, late payments, and other negative factors that impact your credit score can also hurt your chances of getting the job.
Housing Options
Your credit score doesn’t just affect your ability to buy a home. It can also help or hurt you on a rental application. A lower credit score could cause your application to be denied or the landlord could ask for a larger security deposit.
Tips for improving your credit score
Unfortunately, there’s no quick fix for improving your credit score. Building and maintaining a good score is usually a long-term process. If you want to improve your credit score, the appropriate steps will vary depending on your current situation. Here are some tips to get started.
1. Check and Review Your Credit Report
You can obtain free weekly credit reports from this federally-authorized website. Reviewing your credit report will help you check for inaccuracies, fraud, or unpaid balances. If you spot any errors or suspicious transactions, contact your bank or lender immediately.
2. Pay Bills on Time
A record of on-time payments will help you maintain a good score. Set up automatic payments if you have trouble remembering deadlines. When it comes to credit cards, it’s best to pay off your balance every month, but make at least the minimum payment to avoid late fees and having past-due payments appear on your credit report. Finally, don’t forget other bills and payments such as utilities, cell phone, Internet, and more. A long history of on-time payments will help you achieve an excellent credit score.
3. Catch up on Past Due Balances
If you do have late bills or account, contact the company or lender to see if you can work out a repayment plan. Make at least the minimum payment due to stay in good standing.
4. Limit Opening New Accounts
Applying for a new loan or credit card account will trigger a “hard inquiry” on your credit report. This can cause a temporary dip in your credit score, so be careful only to open new accounts when needed and try to avoid applying for multiple new accounts at once.
5. Keep Older Accounts Open
Average account age is another factor in determining your credit score. Even as you open new accounts, it’s best to keep your oldest account(s) open, even if you no longer use them. The longer your credit history, the better your score will be.
6. Manage Credit Utilization Ratio
Your credit utilization ratio is the portion of your credit limit currently in use. For example, if you have a credit card with a $5,000 limit and currently have a $500 balance, you’d be using 10% of your available credit. As a general rule of thumb, try to keep your credit utilization ratio below 30%. If possible, it’s best to pay your balance off each month to avoid interest charges.
To improve your credit score, you could ask for a credit limit increase. This would lower your overall credit utilization ratio even with the same balance. Of course, you should also try to pay down balances that are negatively impacting your credit score. Review your budget to see how much extra cash you can throw at your credit card balance each month.
Improve Your Credit Score with Help From F&M Bank!
Improving your credit score can take time. Learning credit score basics can help you take the first steps towards better financial planning and monitoring. F&M Bank is here to help with “Credit Score,” a free credit monitoring service for our Oklahoma customers when you download our mobile banking app. Take control of your credit score today and reach out to learn more about our mortgage interest rates in Oklahoma!