Student borrowers can see their credit score drop due to late loan payments
According to the Federal Reserve, around 9.7 million student loan borrowers will see a decline in their credit scores.
Straight Arrow News
Perfect credit, or even a really good credit, opens the door for American consumers. Better interest rates on loans. Better possibilities than renting an apartment or landing work. Low insurance premiums.
But how do you get there? All kinds of things can draw your credit score, from missed utility payments to biggest credit cards and credit report errors.
According to Motley Fool, only 1.5% of American consumers have perfected their FICO credit scores. According to Experian, people with full credit tend to get older. Many of them live in Minnesota. Some are personal financial columnists.
If you’re not at that elite club, don’t despair. Many Americans have really good faith. More than 20% of consumers have a credit score of 850 or higher and a credit score of 850 or higher, according to an Experian report. About half of us have credit scores of over 740. Even the low end of that range is considered very good.
“I don’t want the perfect person to be the enemy of good,” said Sara Rathner, credit card expert at Nerdwallet. “If you have a credit score of over the 700s and you’re applying for a loan, you’re in really good condition.”
Below are five expert tips to help you improve your credit score. Some may surprise you.
Pay your bills on time
The biggest factor in your credit score is 35%, “payment history.” Anyone considering lending your money would like to know very easily whether you pay your bills on time.
That means “not missing payments for more than 30 days in particular,” Lasner said. “All the hard work you’ve done can be reversed by missing one payment.”
Credit cards, mortgages, rent, utilities: If it takes a long time for a creditor to report it, it could appear as delinquent on almost any credit report.
“And you want a perfect track record, especially if you’re filming for full credits,” said Joel O’Leary, personal finance writer at Motley Fool Money.
If you missed your payment, the lapse may not necessarily be caught up in your credit report. There is an age of blessing. Normally, if you pay on time, creditors may not be able to report that they have missed one payment. If you quickly correct surveillance, the Credit Universe may never know.
Don’t use too many credits
The second biggest factor in credit reports, which accounts for 30%, is payment amount. The metric refers to credit usage. How many credits are actually available.
Credit usage is difficult. The goal is to avoid using available credits whenever possible. Higher credit limits and having more credit cards can help keep your credits low as long as you behave your credits carefully.
“And I think the best practice here is to keep your utilization below 30%,” O’Leary said. “But I think sweet spots are 10%, or less than 10%.”
The obvious advice here: Pay your credit card back every month.
However, even if you pay it back every month, it is possible to draw a credit score with your credit card balance.
Suppose you put a $1,000 plane ticket into a credit card with a $1,500 limit and pay it back 30 days later. Over these 30 days, card issuers report using two-thirds of the available credits. Your credit score will decrease.
To avoid that scenario, you should pay your credit card at least once a month, especially if you are using a lot of available credits.
“Paying your credit card once a week will reduce usage,” Allley said.
Build your credit history
There are more trust than something that is eye-opening.
Let’s say you have five or six credit cards that you rarely use. Select two or three accounts with zero balances and close them.
Suddenly, there are far fewer credits available. Your credit score will drift.
Experts say it’s wise to leave your old Zero Balance credit card account open, especially if you don’t have an annual fee. Keeping them active will increase your credits available and document your credit history.
“It shows you’ve been a long time and you’re responsible for it,” O’Leary said.
The length of your credit history accounts for 15% of your credit score. That metric is all time. The duration of time the various credit accounts are open, the average age of your account, and how often you use them.
If you have a small amount of credit card and want to keep it active, here are some pro tips courtesy of Courtney Alev, consumer finance advocate at Intuit Credit Karma.
Use AutoPay to place recurring transactions on unused cards, such as streaming payments. Next, place the credit card itself on AutoPay so that your balance is gone every month.
Monitor your credit report
Research by consumer reports and work money from consumer groups shows that almost half of all credit reports may contain errors. Some of these errors can lower your credit score.
Experts suggest that consumers should check their credit reports at least once a year. You can access reports for free on the website AnnualCredItreport.com.
If you find an error, please report it. You can report an error to one of the three credit bureau websites. If the error is on a specific account, you can also contact the company directly.
Also consider monitoring your credits and getting alerts when reports change. Some banks offer free credit monitoring. According to Investopedia, Experian and Credit Karma offer excellent credit monitoring services.
“Make sure you keep a regular monitor of your credit,” said Aleph, Credit Karma. “Many people don’t think about their credit score until they apply for an apartment or apply for a loan.”
Please be aware of “hard” credit inquiries
Every time you apply for a new credit and a creditor draws the file, it can affect your credit score. According to Experian, these are called “hard surveys” and can affect your score for 12 months.
Among other scenarios, applying for a credit card, car loan, or mortgage usually results in harsh inquiries.
“And one or two aren’t a big deal, but if you’ve applied for too many in a short period,” said O’Leary, Motley’s fool.
“New Credits” account for 10% of your credit score.
Takeout: If you are about to apply for a mortgage or car loan, “applying for an entire credit card may not be a good idea,” Lassner said.