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How to Improve Your Credit Score

How to Improve Your Credit Score
Your credit and loan decisions can follow you for years and decades.

Most people don’t place too much concern on their credit score until they are about to make a large purchase such as a car or home. However, planning for these types of purchases should start months or even years before such a purchase. If you’re considering financing a new large purchase, no new credit lines should be obtained for several months and account balances should be decreased as much as possible.

Your credit score is more important than you think. You’ll get the best interest rate on your mortgage with a higher credit score and sometimes even potential employers will run a credit check to see how responsible you are financially before finalizing the hiring process. A good credit score is not necessarily a simple task, but it is doable with careful planning.

What is the standard definition of a good score? The best interest rates will typically be received with a credit score of 740 or higher. A score lower than 620 might make it difficult to get a loan or mortgage. You can be proactive and take steps to improve your credit score:

1) Make all of your credit card payments on time. Late payments decrease your score and remain on your credit report for years.

2) Reduce your credit card balances. The higher your available credit, meaning the lower your balances, the higher your credit score will be.

3) Don’t close old credit card accounts you aren’t using. The age of your credit has an impact on your score. The longer the accounts have been open and in good standing, the better your score will be.

4) Don’t open any new accounts. New accounts hurt your credit score because of the logged credit inquiries. Each time you take out a loan or open a new account, the inquiry is noted and your score can drop.

5) Don’t raise a red flag. If you suddenly start making small monthly payments on your credit cards compared to paying them off every month, this could signal risk and concern your credit card company, then they could reduce your line of credit.

6) Regularly obtain a copy of your credit report. It’s a good idea to check your report regularly for inaccuracies. Unknown errors can also sink your credit score.

If you’re having trouble making payments on time it might be a good idea to set up reminders in your calendar or on your smart phone. Closing an account or paying off a collection account doesn’t mean it will disappear from your credit report, however it will reflect that you’ve paid the debt.

Most importantly, understand that previous credit problems won’t haunt you forever. Your score will improve with time if you stay aware, take steps to improve your score and take necessary precautions against decreasing your score.

If you have questions on planning for your financial future, contact the Bayntree Wealth Advisors team at questions@bayntree.com or 480-494-2750. Bayntree dedicates substantial time to ensuring clients have holistic plans that include building financial health and wealth.

Bayntree Wealth Advisors, located in Phoenix and Scottsdale, Arizona, provides comprehensive financial planning and wealth management. The Bayntree team specializes in all aspects of financial health, including retirement planning, risk management, investment advice, tax strategies, estate planning and insurance.

Bayntree does not provide specific legal or tax advice. Please consult with your tax advisor or legal professional for guidance with your individual situation.

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