The nature of your credit score will tell lenders if they can trust you or not. This means that if you have an excellent credit history, they’ll be more than happy to give you a loan. In fact, they will want to give you loans. When your credit score is excellent, you’ll receive lots of promotional emails and letters, offering you 0% interest rates and low APR loans. Exactly why you should know how to increase your credit score.
Your credit score has a great influence on your lifestyle: it can determine where you live, the kind of car you drive, the kind of jobs you can get, and many other aspects of your life. These are ten effective tips you can use to improve your credit score:
1. Get A Copy Of Your Credit Report
You should have a copy of your credit report before you can start to improve your credit. It will enable you to understand the areas that need work. Your credit report will have information on repayment history, debt and credit management, and information on any bankruptcy collections or repossessions.
There are three major credit bureaus or agencies and you can get your annual credit reports from all of them at AnnualCreditReport.com.
2. Dispute Any Credit Report Errors
You’ve now gotten your credit report, carefully check to see if all the information is correct. Although it’s not common for people to have mistakes in their credit reports, it’s still possible for it to happen. It’s important to carefully go through the report and know if there are any errors.
At times the mistake can be as simple as a wrong address, or but it can also be an inaccurate entry of a late payment. The latter can have serious damaging effects on your score. And with the existence of the Fair Credit Reporting Act, you have every right to an accurate credit report. Also, if you have any disputes, the credit bureau has to investigate them within 30 days.
3. Pay Off Debts
This tip is obvious. When you have lots of debt, you are only hurting your credit score more. If you have a lot of outstanding debt, lenders wouldn’t like to give you loans because it means that you might not pay it back.
Your outstanding debts in proportion to your overall credit makes up 30% of your credit score, so when you clear your debts, you’re making a major improvement in your credit score.
4. Use Apps And Tools
These days, you don’t have to go through the complexities of improving your credit score by yourself. There are many apps and tools that can help you out. All you have to do is to search for them on Google.
I’ll recommend that you check out the Experian Boost. If you’ve been regular in paying your cell and utility bills, this free tool keeps a track of these payments and adds them to your Experian Credit File. This will be used to give you a real-time credit score.
5. Keep Balances Low On Credit Cards
Getting a credit card can indeed be healthy for your credit score, but the reverse is the case when you max it out.
When your credit score is being calculated, one factor that is considered is your credit utilization ratio. This means the amount of money you spent compared to the maximum you had to spend. Therefore if the total credit per month on your credit cards is $10,000 and you spend $2,500 a month, your credit utilization region is 25%. You should keep this ratio below 30% if you want to have a good credit score.
6. Always Pay The Credit Back On Time
This is one of the cardinal rules of having an excellent credit score. You have to settle any credit payments on time. No matter the type of loan you took out—mortgage, auto-loan, store-finance, or credit card, late payments will badly affect your credit score.
7. Get Some Credit If You Do Not Have Any
If you did not have credit before, then you need to get some. This is because would want to know your history of taking loans and repaying them. If there’s no such history, they won’t have any basis for making their lending decisions.
If you want to start getting credit, you can get a beginner credit card or purchase something from a store on finance. However, you should make sure that you can be able to pay back.
8. Keep Old Credit Cards Open
You should try to keep your old credit cards open, so far as it’s not costing you money. This is a good way of improving your credit score because of the credit utilization ratio. If you close one of your credit cards, you can increase your credit utilization ratio and this will affect your credit score.
9. Don’t Apply For Too Much New Credit
When you apply for credit, it creates a “hard inquiry” on your credit score. This will remain on your credit score for about two years and can badly affect your credit score, especially if you had an unsuccessful application. The best thing is to apply for the credit you can easily receive.
10. Be Patient
The process of improving your credit score is one that requires a lot of patience. It won’t happen overnight. Although it can take months and years to make a significant impact, it’s worth doing. You should have a long-term plan on how to improve your score and follow it until you’ve gotten the credit score you want.