Throughout this
article, we will look at five useful ways to
improve your credit score.
In the modern
world, your credit score has never been so important. It can determine what
home you invest in or what job you apply for, which proves the impact it has on
different aspects of your life.
The standard credit
score ranges anywhere between 300 to 850, and the higher your score, the less
restricted you are with future investments.
Your credit score
can advantage you in many ways, however, it doesn’t define you as a person.
That said, you can increase your score, but you should know it won’t be an
overnight feat.
If you’re worried
about your current credit score, you should know that there are many ways to
elevate your score and can be done by following useful steps and suggestions.
Stick around to
check out some of our best tips to improve your credit score!
- Pay your bills on time
The most straightforward and impactful way to improve your credit score is to keep track of your outings and paying your bills on time.
It is worth
mentioning, however, that there are different shades of difficulty to pay your
bills on time, depending on your job role and financial situation.
That said, these
tips don’t discriminate, and we always recommend people to live within their
means and make the payment of bills a priority before anything else.
Remember, you are
not alone, and there are financial advisers at your bank and a multitude of
apps to use to form a plan to understand your cash flow.
Knowing what money
is coming in and out when it is coming in and out, etc. will kickstart your
journey to a desirable credit score.
- Monitor your credit report
According to the
FTC (Federal Trade Commission), 5% of customers have at least one error on
their credit report.
If you’re worried
about any mistakes on your report, it is essential to monitor it. You should
know you are entitled to receive one free copy of your credit report each year,
and if you need another, you should expect to pay out for further monitoring.
After you acquire
your reports and if you see any inaccuracy, then you should immediately dispute
these charges and get to the bottom of anything burdening your cred score
growth.
It also helps to
keep an eye out for outdated collections items that still appear on your
report. In alignment with the law, these items can only stay on your credit
report for seven years, and therefore if it’s been longer than that, you can
always request to have these items removed.
- Don’t close out any credit cards
If you’re paying
off any credit card debt and feeling worried about your credit score, it is
best not to close out your cards once you have paid them off.
The reason being is
because if the card is closed, you can’t spend any more money on it and will
have an impact on your credit score.
It can hurt your
credit if you are consistently opening and closing credit cards, and therefore
it is wise to have one which you know yore able to pay off on time without any
delays.
Even if you don’t
have any intention to use the card, if you keep it open, it will improve your
credit score and broaden your chances for home investment and job prospects.
However, if there
are inconvenient charges with the card, it is understandable to close it to
work on your financial circumstances.
- Increase your credit limit
After gaining a
good understanding of your cash flow, you should consider improving your credit
utilization rate. A strategic way of doing this is to ask your lender for a
credit limit increase.
A credit limit
increase of $1,000 to $2,000, for example, will immediately refine your credit
utilization rate. Before doing this, it is best to confirm your lender doesn’t
already routinely increase your limit without informing you.
That said, this
strategy only serves you if you don’t have any other additional expenses. If
you increase your credit limit only to make room for more consumption, it won’t
benefit you in the long run.
- Lower your credit utilization rate
A beneficial way to
improve your credit score is to lower the amount of credit you spend in
comparison to your total credit limit.
Your credit score is calculated using these five
categories:
- Payment history: 35%
- Amounts owed: 30%
- Length of credit history: 15%
- New credit: 10%
- Credit mix: 10%
If you have multiple maxed-out credit cards, it will automatically impact your credit score because one-third of your score is determined by the amount you currently owe.
The takeaway here is
the higher your credit utilization rate is, the less attractive your account is
to lenders. So, to quickly improve your score is to finalize payments for any
old balances to lower your utilization rate.
Recap
While everyone has
different financial circumstances, the tips we’ve explored in this article can
assist you on your journey of improving your credit score.
Whatever your
situation, it is sensible to understand your finances and to live within your
means. It can be challenging, but as we have outlined here, higher credit
scores can entertain future opportunities more than a low credit score.
After reading
through our tips, we hope you have a better understanding of how to manage your
money and ultimately improve your credit score.
