Your credit score is an essential metric that can help you improve your life by unlocking more financial options. A good credit score may allow you to qualify for a business loan to grow your brand, buy your dream house, or even invest in property at the perfect time. A low credit score, however, is something that can hamper financial opportunity. So let’s look at nine ways to improve your credit score.
1. Take Steps to Build Your Credit History
The first step in building your credit file is to open new accounts that will be reported to the major credit bureaus. Opening several credit accounts and keeping them active can help you establish a good track record as a borrower.
2. Get a Copy of Your Credit Report
Creating a credit score involves analyzing your credit report, which is a long record of all your credit dealings. TransUnion, Equifax, and Experian keep credit reports that contain similar information but are slightly different. In addition, AnnualCreditReport.com offers one free credit report each year for each credit bureau.
3. Reduce Your Debt
Having the option to borrow money can be a good thing, but it’s advisable to do so wisely. Lenders generally question your borrowing practices if your total credit card use exceeds 30 percent. Your credit utilization rate is used to measure this. You use a certain amount of credit compared to your total credit limit, and the lower your number, the better your budgeting is.
4. Pay Your Bills Automatically
Put your bills on autopilot if you struggle to remember to pay them on time. Online payments are usually easy to set up with most companies. As a result, you won’t need to worry about missing due dates or running out of stamps.
5. Sort Out Past-Due Account Payments
Making your bills current could help if you have fallen behind. Your credit report can reflect a late payment for up to seven years, but keeping all your accounts current can improve your score. It also prevents late charges and additional fees from appearing on your credit report.
6. Don’t Close Old Accounts
Credit ratings are based on the average age of all your accounts, your oldest account, and the oldest statement on your credit report. Open accounts can be worth leaving alone to collect dust if you don’t pay annual fees. In addition, you will have a higher credit score if you have had credit for a longer period.
7. Increase Your Credit Limit
The two ways to increase your credit limit are to ask your current credit card company for an increase or to open a new credit card. Your credit utilization rate will be lower the higher your available credit limit (as long as you do not max out your card each month). You should ensure that you only spend what you can afford before asking for a credit limit increase.
8. Consolidate Your Debts
You may benefit from taking out a debt consolidation loan from a bank or credit union if you have a lot of outstanding debt. Then you’ll only have to deal with one payment, and you’ll be able to reduce your debt more quickly if you get a lower interest rate. In turn, your credit score can improve due to an improvement in your credit utilization ratio.
9. Monitor Your Credit Score
The best way to keep track of your progress is to monitor your credit score over time. Your credit report is updated when you open new accounts or pay off old ones. Additionally, they usually give you access to your credit scores, which are updated monthly.
Your credit score is a vital indicator for lenders and other financial institutions. So always make sure you follow these steps to keep it as high as possible!