If you’ve ever had trouble getting a loan or been denied credit, chances are your credit score was an issue.
Credit scores are calculated based on your past behavior with financial institutions. The higher your score, the better your chances of being approved for new loans and credit cards.
If you have good credit, it’s important to take care of it! You can do this by adopting simple habits like always paying off your bills on time, keeping debt low (ideally below 30%), and avoiding late payments.
But what if you don’t have good credit? Are there any ways to raise your score? Let’s find out.
What is a Credit Score?
A credit score predicts the likelihood of timely loan repayment. Your credit score is gauged based on a few factors, most of which include your past payments like your:
- Payment history
- Debt
- Types of accounts opened
- Credit applications
- Foreclosure
- Bankruptcy
Tips for a Better Credit Score
If your credit score is lower than you’d want it to be, there are a few ways to boost it. Depending on what’s holding down your credit score, you can add a few points to your credit score by following these tips.
Pay Credit Strategically
Credit builds up fast. If you ignore your credit card balances, they will continue to add up. It’s a good idea to develop a strategy to monitor your credit balances. Of course, paying with a strategy comes with rewards.
There are a few things you can do to pay off your credit quickly to positively impact your credit score in the long run:
- Pay more than what you owe each month
- Try to make more than one payment every month
- Focus on paying off your most expensive debt
- Try to renegotiate your loan term to make it shorter
Aim for a Reasonable Credit Utilization
Most people aren’t aware that banks don’t commend you for spending your entire credit limit even if you pay it off on time. If you really want to build your credit score more quickly, you should only utilize 30% of your credit limit.
A good rule of thumb to remember is that you should aim to spend less than your total credit limit each month. This will make it easier for you to make timely payments while also building up a record of paying off your debt on time.
Ask for a Credit Limit Increase
If you’re unable to reduce your spending, consider asking for a credit limit increase. Keep in mind that this may only work if you don’t have any outstanding balances with the bank.
This way, it will look like you’re spending less, without really doing anything to change your spending habits.
Pay Bills on Time
Every bill or transaction should be paid on or before the due date. Late payments will only drag down your credit score further. Here are some things you can do to stay on top of your due dates and ensure that you don’t miss a payment:
- Set account reminders
- Automate your payments
- Mark it on your physical calendar
Correct Credit Report Errors
The smallest mistake could pull your credit score down considerably. So, when you’re conducting a review of your credit reports, make sure you take note of any incorrect information. Mistakes happen, and it’s never a bad idea to contest them especially if they affect your credit score.
This is also a good opportunity to spot charge-offs, which you’ll want to work towards removing.
Why A Good Credit Score Is Crucial
Credit scores are the three-digit numbers lenders use to determine whether or not you’re a reasonable credit risk. Additionally, they look at your past payment habits and other factors, such as the type of accounts you have opened and how long they’ve been open.
A low credit score can make it harder to get approved for loans, mortgages, lines of credit, and more. A high credit score, on the other hand, may help you get approved for these products at a lower interest rate.
The higher your credit score, the better your chances of getting approved for a loan or credit card.
Increase Your Credit Score Today!
The tips we’ve outlined here will help you to improve your credit score and, in turn, make it easier for you to manage your finances and get the loans you need. If you are looking for a loan, consider using these tips to increase your credit score so that you can qualify for better interest rates and repayment terms.
