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It also helps to keep an eye out for outdated collections items that still appear on your report.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.
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.