Think back to when you were about to make your first big purchase that required borrowing money.  Were you sitting anxiously in a lender’s office awaiting the approval to buy that shiny, new, black two door?  Unbeknown to you, before you could get a whiff of that new car smell, the lender reviewed a number that either make or “brake” your dream:  your credit score.

Your credit score is the crystal ball that lenders look into to see how likely it is you will pay back that loan in the future.  A number ranging from 350 – 850, it is heavily relied on to decide whether or not you can borrow money.   Everyday actions such as paying bills and using a credit card impact your score.

So what exactly does a lender deem as a favorable credit score?  Most will view any score above 750 as excellent, and in return will offer you a better interest rate on your loan.  But what happens when you’ve been late on bills or apply for new credit cards every trip to the mall?  Your score can decrease.

With a low credit score, you may have been turned down for a loan or maybe got stuck paying a higher interest rate (causing your big purchase to cost even more).  If this sounds familiar, you have probably made a vow to turn things around.  The challenge you are facing now is how to change it.

Much like dieting, there is no quick fix.   It takes time and discipline to improve your credit score.  To help you get started, here are a few areas to focus on:

  1. Review your credit report.  You are entitled to one free credit report per year from each of the three reporting agencies, (Experian, TransUnion, and Equifax), which can be requested at AnnualCreditReport.com.  It is important to check your report annually for errors and to gain insight on what is having a negative effect.  Any errors that are found can be disputed with the credit bureau.  This review can also detect possible signs of identity theft.
  2. Pay on time, every time.  Late payments of any kind are hurting your score.  Payment history actually makes up the largest percentage of your credit score, 35%.  Setup reminders on your phone or through email to ensure you are staying on top of all due dates.  Bill pay features, such as the one available on 1st National Bank’s online banking, allow you to schedule all of your  payments ahead of time in a single dashboard, saving you time and worry of missing payments.
  3. Make a plan to reduce the debt you owe.  Amounts owed to creditors contributes to 30% of your credit score.  Keep balances low and avoid opening up new credit cards.  The number one way to tackle this is to simply stop buying with credit.  If you don’t have the cash, then wait to make the purchase until you do.

Remember, you will not see results overnight.  This process of rebuilding your credit score requires patience and consistent payment behavior.  Contact a trusted professional today to discuss more ways to develop healthy financial habits and get on a path of improving your credit score.

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