There are many ways to improve one’s credit score–and it is not always difficult to do. With just a few simple steps, you can boost your credit score and learn how to maintain them in the future.
Before you learn how to boost your credit score, knowing what your credit score depicts is essential. Only then will you be able to understand details regarding improving your credit score.
What Does Your Credit Score Say About You?
Credit scores are calculated through scoring models and computer algorithms that use different factors to determine your credit score. For example, scoring models exist to predict the likelihood of how late a borrower would be in paying a bill in the next 24 months.
If you have a high credit score, you are less likely to fall behind on paying your credit card bills. You can also get lower interest rates when you borrow with a higher credit score. You will find that getting approved for new loans and lines of credit is easier if your credit score is better.
On the other hand, a low credit score marks you as a person who is usually late in paying credit card bills, which shines a particularly negative light on your overall profile.
9 Ways to Improve Your Credit Score
Here, we outline specific steps that can help you improve your credit score. Of course, your success depends on your credit situation. However, most of these steps can help increase anyone’s credit score.
Building A Credit Track Record
Most lenders report to major credit bureaus to keep things running smoothly. Therefore, having an affiliation with accounts that report back to the correct authority is an essential step in building your credit profile.
If you do not have credit accounts that report to standardized credit bureaus, you do not have a profile to show if you ever want to apply for borrowing money.
There are different ways through which you can build your credit file. These include:
· Applying for credit builder loans
· Applying for a rewards credit card
· Becoming an authorized user on someone else’s credit card, such as a spouse or a parent
Do Not Skip Due Payment Dates
Missing out on payments can hurt your credit score immensely. It is important to keep in mind that your payment history is an essential factor in determining your credit score. If you have a long history of on-time bill payments, then nothing can stop you from receiving excellent credit scores.
Hence, always ensure that you do not miss out on a loan or credit card payment because more than 30 days of late payments can be reported to credit card bureaus that do not look good for your credit score.
To ensure timely payments, you can easily set up automatic payments through your bank account. However, if you find yourself in a situation where you cannot afford your bills, it is wise to reach out to your bank manager for more accessible, more feasible payment options.
Cater To Past-Due Payments
Catching up on your past bills can be a good move for your credit score. You should pay down your credit card balances to keep your overall credit use low.
Typically, a late payment on a credit card can remain on your profile report for at least six to seven years. Therefore, bringing your past-due payments current can enhance your score, stop further late payments from showing up on your credit report, as well as save you some late fees.
Watch Out For High Credit Utilisation Rates
Even if your bills are paid on time, having a high revolving credit account balance can lead to an increase in credit utilization. As a result, this can negatively affect your credit scores.
In most cases, credit card debt makes up a significant portion of a borrower’s total credit utilization. You should pay down your credit card balances to keep your overall credit use low.
Depending on their credit limits, maintaining a low balance on credit cards can help you boost your credit scores. Increasing your credit scores can benefit your credit utilization ratio if your balance doesn’t go up simultaneously.
Curb Your Credit Account Applications
Even though you may need to open accounts in your names to build your credit file, you still want to be careful about how many new accounts you apply for. This is because each credit application you put in can lead to an inquiry.
Inquiries about your credit scores, records, and credit utilization rates can hurt your score, especially if more than one.
Moreover, opening new credit accounts also decreases your accounts in age, which hurts your credit scores.
It is essential to remember that account age and inquiries are scoring factors. Hence, it would help if you were careful about how many credit applications you submit.
Contact Your Creditors
Setting up easy payment plans to protect your credit score is wise if you cannot afford monthly bills or have missed out on your payment deadlines.
If you contact your credit card companies and creditors and quickly address the problem at hand, it can save you from the adverse effect caused by high outstanding balances and late payments.
Let Your Unused Credit Card Accounts Stay
Account age and credit history matter a lot when it comes to your credit scores. However, a long history is always preferred over a short one when it comes to matters like these.
If you have to close down a credit account, choose to close down a newer one rather than a relatively older credit card account.
Second Maxed Out Cards First
If you use multiple credit cards and owe money for each of them, it is important to pay the one closest to the maximum limit. Settling cards more relative to your credit limit can bring down your credit utilization rate, positively affecting your credit scores.
Take out a loan
If you have a stable job, a great way to boost your credit scores is to take out a loan. In addition, you can opt for auto loans emergency loans such as the ones Jacaranda Finance offers. This will help you make regular payments and positively impact your credit history.
Even though it can be a bit difficult to understand where to start, rebuilding your credit score takes simple tasks such as paying your bills on time and maintaining low balances. This step is necessary to secure a future where your financial security is a given.