Did you know your credit score is one of the biggest factors in determining how much you pay for home and auto insurance? Having a good credit score saves you a ton of money on your home mortgage, auto loans, insurance and more. It’s quite the compounding affect. Let’s take a look at 5 ways to improve your credit score.
5 Ways to Improve Your Credit Score
1. Use a credit monitoring app
Keeping track of your credit health real-time can help you improve your credit score. Using a credit monitoring app is an easy way to stay on top of things. By turning on notifications you can create a “set it and forget it” system. You’ll receive periodic notifications about your updated score, recent changes and tips on how to improve your score.
A word of caution here: these apps make money by receiving a commission when you buy services from their vendors such as banks and credit card companies. While that’s not inherently bad, don’t be tempted to take on debt because they show you a low APR credit card. They actually do a really good job showing you reputable creditors and suggesting what fits best for you, but if you struggle with debt discipline, this may be too tempting for you.
Many of these credit monitoring apps have relationships with insurance companies as well. They will be showing you teaser rates on your auto insurance. This is a cookie cutter approach and many times they’re just getting a quote from Progressive. Do yourself a favor and work with a real insurance broker who represents many carriers and can assist you in choosing the insurance that’s right for you, like Partners Insurance……haha see what I did there? But truly, we got this whole insurance thing figured out.
2. Use a budgeting app to control spending
Sticking to a budget should be your foundation for improving your credit score. One of the biggest factors to your credit score is your credit card utilization. If you stick to your budget you won’t be tempted to use those credit cards. Using an app is a great way to have your spending staring you right in the face. It’s like your own personal accountability partner, who doesn’t sleep or sugar coat the truth about how you spent $80 at Starbucks last month! You are infinitely more likely to adhere to your budget when it’s readily available and easily accessible.
3. Lower your credit card utilization
This will quickly improve your credit score. We’re talking 30 days or less. Start by reviewing your budget using one of the apps we just suggested. Are there any areas where you can cut spending? More than likely the answer is yes. Apply the savings towards your credit card balances. To maximize your score you need to get your credit utilization below 10%. So, if your credit limit is $1,000, your balance should be less than $100.
If you have good payment history you can apply for a credit limit increase. If approved, you’ll instantly lowered your utilization. Be careful though because you have now increased the amount you can charge which can potentially get you into more trouble if you struggle with discipline.
4. Work out a payment plan with accounts in default
If you have any accounts that are in default they have undoubtedly already done damage to your credit score. Your goal now is to stop the bleeding. Call them and work out a payment plan to get it resolved. Sometimes the creditor will offer to settle for a lower amount if you pay in full. Be careful here, this negotiated amount could be negatively reported to the credit bureaus so you’re better off paying the full amount back in a payment plan in many cases.
5. Limit applying for new credit accounts
Each time you have a “hard inquiry” your credit score will go down a few points. These fade over time but will affect you in the short-term. So, if you have a big purchase coming up like a home mortgage or a car, it would be wise to not apply for other credit accounts for awhile.
Have you significantly improved your credit score lately?
If you have recently increased your credit score you’ll likely save a lot of money on home and auto insurance. With your credit score being a huge factor in determining your insurance rates it could be a good time to explore. Remember, to get the very best coverage and rates you need to work with a reputable broker who can navigate dozens of options for you.