By Maddie Daniels, Digital Communications Manager, America Saves
Having a low credit score (a score below the mid-600s) can cost you big time. Unfortunately, many underestimate the true cost of a low credit score, according to a new survey by Consumer Federation of America (CFA) and VantageScore.
A low credit score, compared to a high credit score (700), typically increases the cost of a 60-month, $20,000 auto loan by more than $5,000. The costs are even higher for a mortgage. Learn more about the credit score details you should know that could save you money.
And a low credit score impacts more than just interest rates. Many non-creditors use credit scores to decide service availability, things like if they will rent an apartment to you or how high your security deposit will be.
The good news is we’re here to help. If you have a low credit score, take comfort in knowing that you can raise your score from sub-prime to prime in less than nine months, excluding foreclosure or bankruptcy. These five tips can help you raise your credit score:
1. Pay bills on time
It is critically important to your credit score to make all loan payments on time, in full, every month.
2. Use only a small portion of the credit available to you
VantageScore recommends keeping outstanding charges at or below 30 percent of your available credit limit. So avoid maxing out, or even coming close to maxing out, credit cards or other revolving credit accounts even if you are making all of your payments on time.
3. Reduce your debt
Pay down your debt, rather than move it around from one account to another.
4. Limit your number of new accounts
Avoid opening multiple new accounts within a short period of time. If possible, avoid opening new accounts altogether when you are working on raising your credit score.
5. Check your credit report
Check your credit report for free at least once a year. It will help you gain a better understanding current credit and debt situation before obtaining a loan, and will highlight opportunities to improve your credit score.
You can access these reports for free at annualcreditreport.com, or by calling 877-322-8228, and should always do so before seeking a mortgage or car loan.
Looking for more information? Be sure to test your credit score knowledge at CFA and VantageScore’s creditscorequiz.org and learn more about credit score basics and details.
This article was originally published on the America Saves blog.