As we go into a new year with financial resolutions top of mind, it's worth remembering how important your credit score is in the bigger picture.
In fact, your credit score is the best place to start your financial resolutions since it can have a ripple effect in other aspects of your life as the year goes on. This is especially true if you've got a big move coming up — and want to qualify for a lease or mortgage — or even if you simply want to open a cash-back credit card to earn extra money on your spending.
A good credit score — which falls within a 670 to 739 range on the FICO scoring model and a 661 to 780 range on the VantageScore model — can help you get approved for the best new credit cards, qualify for any type of refinancing and score the lowest interest rates on nearly every kind of personal loan that you might need in 2021.
As we approach a new year, CNBC Select offers three easy ways you can increase your credit score and see this financial resolution come true.
While there are a variety of credit monitoring services that provide different levels of credit protection, the two types are basic (free) and premium. Premium services cost anywhere from $8.99 to $39.95 per month, and the big perk of paying for these programs is that you have more coverage and extensive protection than you would with a free service.
After you sign up, keep an eye out for potential misuse of your personal information. Actions such as someone else opening a line of credit in your name, can bring your credit score down. It's best to be proactive when protecting your credit history.
CNBC Select ranked our top six services and CreditWise® from Capital One ranked as the best overall free program because it comes with dark web scanning and social security number tracking (unlike other free services). IdentityForce® ranked as the best overall paid program for extensively monitoring your information on a variety of sites and services, including the dark web, court records and social media.
Paying your bills on time in the new year can instantly raise your credit score.
Experian Boost™ is a free service that lets you add your on-time phone, internet, cable, utility (gas, electricity, water) and streaming payments like Netflix®, HBO™, Hulu™, Disney+™ and Starz, to your Experian credit report.
To use Experian Boost, you connect the bank account(s) you use to pay these bills mentioned above. After verifying the data and confirming you want it added to your Experian credit file, your payment history will be calculated into your credit score. You'll get an updated FICO Score instantly and also receive a free copy of your Experian credit report.
According to the credit bureau's website, average users receiving a boost reported a 13-point increase in their FICO Score.
If you're entering 2021 with poor credit or no credit history whatsoever, there are credit cards specifically made to help you rebuild or build credit from scratch.
Some of the best credit cards for building credit are called secured credit cards. Just like traditional (or unsecured) credit cards, secured cards extend you a line of credit, charge interest and may even offer rewards. The big difference, however, is that most secured cards require you to make a deposit (typically $200) in order to access a credit limit. Whatever amount of money you deposit usually becomes your credit limit.
The key is to use these credit cards responsibly, which means only charging what you can pay off in full by your credit card bill's monthly due date. This way, you show a pattern of steady on-time payments, which helps improve your credit score over time.
An example of a great credit card option that falls into this credit-building category is the Discover it® Secured. Cardholders receive access to many of the perks and benefits available to people with higher credit scores, including a robust cash-back program, a generous welcome bonus, no annual fee and no foreign transaction fees. There is a $200 minimum deposit requirement to open your account (up to $2,500), and your credit limit is equal to your deposit. Plus, cardholders can seamlessly transition to a traditional credit card (and get their security deposit back) after eight months of opening their account.
Earn 2% cash back at Gas Stations and Restaurants on up to $1,000 in combined purchases each quarter. Plus, earn unlimited 1% cash back on all other purchases – automatically.
Dollar-for-dollar match of all cash back earned the first year
N/A on purchases
3% intro balance transfer fee, up to 5% fee on future balance transfers (see terms)*
New / Rebuilding
*See rates and fees, terms apply.
For rates and fees of the Discover it® Secured, click here.