How to Raise Your Credit Score in 7 Easy Steps
A high credit score may pave the way to several financial benefits, such as better loan terms, home-ownership eligibility, and a cheaper interest rate on a car loan. Improving your credit score could appear like an insurmountable challenge, but it’s really very achievable. Get your credit score where it needs to be with these easy tips! So let’s start!
First, Have A Close Look At Your Credit Report
The first step in understanding your credit score is to see and study your credit report. This report includes information on the credit accounts you have, payment records, and liabilities. Every year, you are entitled to one free credit report from the three major credit reporting agencies – Equifax, Experian, and TransUnion. Check your credit report thoroughly and contest any inaccuracies you may uncover by contacting the credit reporting company as soon as possible.
Never Be Late With Your Payments
Avoid being late or missing payments since this negatively affects your credit score. Wells Fargo reports that payment history accounts for a significant 35% of your FICO credit score, therefore you should avoid being late on payments in the future by setting up automatic bill payments and working to eliminate any outstanding debt.
Make An Effort To Reduce Your Overall Reliance On Credit
Another significant component that goes into determining your credit score is your credit usage ratio. Using your card only when absolutely necessary can help you maintain a low usage rate, which Experian experts estimate should be around 30 percent. Think about applying for a personal loan or debt transfer credit card to bring down your excessive credit card bills.
Your Existing Accounts Need To Remain Active
Keeping previous credit accounts active and in excellent financial shape will help increase your credit score quite significantly. As CreditKarma reports, the average length of a consumer’s credit contributes for 15% of their overall credit ratings (FICO score). You should always exercise caution when cancelling an old account, since doing so might have a negative impact on your future financial standing.
Take the common practice of obtaining a student loan in one’s late teens or early twenties as an example. In order to avoid a dramatic decline in your credit score when you pay off your education loans in no more than 5 years, you can opt to apply for a new line of financing and keep your rating neat.
Reduce the Number of Potential New Credit Applications
A so-called hard inquiry appears on your credit report every time you request new credit, and this may have a negative impact on your score, causing it to drop. Bankrate reports that credit inquiry activity makes up just 10% of the FICO rating. Nevertheless, you shouldn’t seek for credit until absolutely necessary.
Consider Applying for a Secured Credit Card
If your credit history is less than outstanding, a secured credit card might be a lifesaver. The credit limit on this card is equal to the amount you deposit. Maintain a good credit rating by using the card sensibly and paying on time each month.
By adhering to established practices, such as maintaining a low usage rate, you may enhance both your credit history and score gradually. People with shaky financial habits should probably go with this alternative since it has the fewest risks.
Confer with a Credit Counsellor for Assistance
Credit counsellors can assist those who are affected by debt and decline in their credit rating. Budgeting, debt reduction, and a higher credit score are all possible with their assistance. It’s in your best interest to look for a reliable credit counselling agency that can help you free of charge or at a modest fee.
Make Sure Your Debt-To-Income Ratio Is Manageable
One further aspect that goes into determining your credit score is your debt-to-income ratio, or the proportion of your monthly expenses that are deducted out of your pay-check.
Reduce debt levels and increase your income to maintain a manageable debt-to-income ratio (below 36%, according to Experian), and think about a private loan or balance transfer credit plan to help you with your finances.
Final Words
With a high enough score, you may qualify for better loan terms or perhaps be approved for a mortgage. Improving your credit rating, however, is simpler than you would first think.
To start with, review your credit report for accuracy and correct any mistakes you find. You may also enhance your credit score by always paying on time, using less of your available credit, maintaining some old accounts open, not applying for too much new credit, and having a secured credit card. Credit counselling services and maintaining a manageable debt-to-income ratio are also good options for those who are drowning in debt.
So wait no more: take charge of your financial situation and boost your credit score like a pro!
