Establishing a good credit score is a crucial part of refining your financial status. Lenders or financial institutions will give you better credit card or loan terms if you have a high credit score. Here are ingenious tips on how to boost your credit score.
Read Your Credit Report
Your report card for credit health defines your credit score. A certified bureau will provide you with a periodical analysis of your borrowing behavior through a credit report card. Sometimes, some of the lenders in your portfolio may fail to report debts that you cleared a few months or years ago.
Such simple errors can inadvertently ruin your credit score. It’s important to take advantage of these free credit report cards and review all the details keenly. For instance, confirm whether all the listed accounts in the report are registered under your name. You should also make sure the mentioned debts are the exact amounts of money you owe. Bad marks such as old payments that are up to 10 years old should be dropped from your credit report card.
Pay On Time
Ensure that all your bills or payments are processed on time. Major credit score bureaus can determine your credit score based on your recent payment history. Lenders only value you as a disciplined borrower, if you usually dedicate yourself to paying your bills on time. This means that all bills, including credit card bills, medical bills, personal loans, and utilities, should be paid promptly.
Set Calendar Reminders
Even the most organized individuals can occasionally get distracted and forget to pay their bills on time. To avoid forgetting about these crucial due dates, set up a calendar reminder, or use an autopay system to help make prompt payments. Thankfully, established utility companies allow their clients to use an autopay system that withdrawals money from their checking or savings accounts monthly. Some student loan companies also consider giving you a discounted rate if you choose to set up autopay.
Open Accounts You Can Manage
Unfortunately, some people tend to open several accounts that they can’t manage. FICO looks at the number of financial products such as credit inquiries in your portfolio when determining your credit score. Only open accounts and purchase essential financial products that you really need to avoid attracting frequent scrutiny on your credit history. If you’re not sure whether a particular credit card is going to be useful in your life, consider applying for an online prequalification form, which won’t affect your credit score in any way.
Pay Down Debt
What is your credit card’s utilization rate? Credit bureaus recommend that you keep the rate at 30%. For example, if the limit of your credit card is $4,000, at a 30% utilization rate, you should spend $1,200. Try as much as you can to get the balance on your card down by paying off around $1,000 of the $4,000.
If you have several credit cards with smaller balances such as $200 or $300, pay them off to get a quick lift on your score. You should set aside a certain amount of money that is dedicated to paying off debts every month. Even the small amounts you save from your grocery shopping can go a long way in reducing your debts.
Avoid Closing Old Accounts
Many people believe that having a record of old debts on their credit cards negatively affects their scores. That is why some people frantically contact bureaus, asking that old debts be expunged from their credit report cards. Conversely, leaving a cleared car loan or paid-off credit card in your records has a positive effect on your payment history. In fact, the longer you allow the paid off loans to stay on your records, the better.
All the sitting credit on your old credit card lowers your utilization rate; you’ll have a higher credit card limit, which will also reflect positively on your credit scoring. With an older open account or credit card in your records, it’s easier to elevate your credit card score. When you cancel the old credit card or close an old account, it shortens your payment history, which in turn hurts your credit score.
Stay Away from New Loans
Every time you apply for any loan, the lender or financial institution will pull your credit report. Some of these inquiries can hurt your credit score. Remember, lenders are more willing to lend to serious borrowers who seem to have a handle on their finances. However, checking your own credit report card regularly can temporally lower your score.
While the damage on your score may be minimal and can restore in a few months, applying for several new loans within a short period raises red flags. This usually happens when you’re applying for several different types of loans from various lenders at once. So, if you’re applying for a student loan, mortgage, or car loan within a month, ensure you only take one to avoid hurting your credit score.
Enroll for A Credit Counseling Program
In case you have tried to do all the above and nothing seems to be working, consider enrolling for a credit counseling program. This is a viable strategy for people who have failed to make ends meets or are struggling to dig themselves out of their financial problems. Financial advisors and experts can help you come up with effective financial management plans.
Qualifying for the lowest rates when applying for mortgages, personal loans, or credit cards requires you to have a superb credit score. In addition, it positions you for generous reward programs and special/VIP welcome bonuses. Apart from that, you may need an excellent credit score when applying for a well-paying job position or renting an apartment.
