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Tip #8: Don’t Apply for an Abundance of New Credit

Your credit history factors into the strength of your credit score. This factor will average the ages of your loans, credit cards, and other lines of credit.

A long history of credit offers a lender more information to assess your creditworthiness. It can also be an indicator that you have successfully been able to obtain and manage credit for an extended period.

Keeping credit card accounts open, even if you’re not using them, can be a good strategy for retaining a long credit history. If you cancel old credit cards, you could shorten your credit history and hurt your credit score. However, it may not be a good idea to keep a credit card open if it has an annual fee and you’re not using it.

Be careful about applying for lots of new credit, especially if you don’t need it. Each time you apply for a new credit account, lenders pull a hard credit inquiry. Too many hard credit inquiries can hurt your credit score, particularly if the inquiries take place within a short period.

It is important to note that there is a difference between a hard credit inquiry and a soft credit inquiry. Hard credit inquiries can occur when you apply for the following types of loans or credit:

  • Mortgage
  • Auto loan
  • Business loan
  • Personal loan
  • Student loan
  • Credit card
  • Background check for employment
  • Background check for renting an apartment
  • Credit prequalification

Tip #9: Become an Authorized User

Becoming an authorized user on someone else’s credit card account can improve your credit score. When you are an authorized user of a credit account, the account’s payment history appears on your credit report. If that payment history is positive, this could raise your credit score.

However, this strategy can backfire if the account holder doesn’t pay their bills on time. If the primary account holder does not make timely payments, these late payments will not only go on their credit report but also on yours!

Additionally, you will want to make sure that the cardholder you plan to partner up with does not have a high credit utilization ratio.

Bottom Line: If you are considering becoming an authorized user to help build your credit score, there can be some risks if the strategy does not go as you had planned. Therefore, be sure that the primary account holder has a history of making their payments on time, and that they don’t have a high credit card utilization rate.

Tip #10: Know Exactly Where You Stand – And Where You Want To Go

Knowing your credit score can help you with making smarter overall financial decisions, such as choosing credit products that can help you build or rebuild credit. It can also help you to keep your credit score in a higher range as you monitor your credit report for inaccuracies.

Where To Start With Improving Your Credit Score

Your credit score can take into consideration many years of your past bill-paying behavior. Even though credit score improvement isn’t likely to happen overnight, the sooner you start incorporating positive financial habits, the sooner you will see an increase in your credit score.

Bottom Line: Just like other important areas of your life, there isn’t a one-size-fits-all way to increase your credit score. Get started by taking a good look at your debt obligations, and develop a plan that works the best for your specific goals.

Final Thoughts

For most people, borrowing money and having good credit is a necessary part of life. Building a solid credit history and maintaining a high credit score is essential, and it can have a substantial impact on your overall financial life, both now and in the future.



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