Eight smart ways to improve your credit scoreby Bhavna S. Financial Advisor
A credit score is an estimate of an individual’s creditworthiness. The credit score is based on the credit history of a person, which includes the credit card bills and previous payment history. When you are applying for a credit card or loan, the first thing that lenders undergo is a good credit score check. It gives them a measure of your ability to repay the borrowed amount. The range of a credit score is 300-900. Banks prefer a credit score of 750 and above for extending loans. Always try to have your credit score near 900. For being approved for loan applications and getting loans at better interest rates, the credit score is the principal determinant. Similarly, it is very crucial to devise a credit report as it helps to maintain the records.
Ways to improve your credit score
By using your credit responsibly and wisely, you can maintain a good credit score. However, it is essential to keep an eye on the credit score regularly and take steps to improve it. They are:
Avoid making multiple loan inquiries and new loans
Numerous loan inquiries impact your credit score negatively. It gives the lender a sign that you are probably falling short of cash. However, making inquiries for a particular loan to get the best interest rate will not affect your credit score. Avoid taking out new loans frequently. Having old accounts on your report impacts the credit score positively while having new accounts will impact it negatively.
Pay your bills on-time
Paying loans on time is the most crucial step to improve your credit score. The more delay you make to pay your bills, the more it affects your credit score. Even if you were late while paying bills in the past, you could outweigh it by making timely payments every month. Your recent behavior matters more in your credit score. Your score will gradually keep increasing if you pay your bills on time. You can make use of tools and resources such as calendar reminders or automatic payments to pay the bills on time.
Check credit report to verify inaccuracies
Your credit report might contain a misreported balance. Ensure that the information regarding the unpaid or late payments is accurate. Any late payment that happened more than seven years ago should be dropped from the report. You can contact the credit bureaus to discuss the errors.
Use credit cards regularly
It is advisable to use your credit card every once in a while. By following this, your card will remain active, and your repayment behavior will get reflected on your credit score. The positive record on your credit card will be lost if, due to inactivity, your credit card gets canceled.
Consider credit counseling
Credit counselors will set up a plan for you that will help you to pay off debts in secure monthly payments. Sometimes, they even negotiate with creditors to lower the dues and interest rates.
Pay down debt
Your credit score suffers if the utilization rate of your credit card balances is higher than 30% of the credit limit. You can increase your credit score by paying off money to all the accounts you owe.
Pay in full
Pay the bills in total to get the balance down to zero. By doing this, new debts will not be piled up on old ones, and you will not be burdened with paying a high stability at once.
Keep old credit cards
You must keep your old credit card even if you do not use it anymore, as unused credit will keep your utilization rate low. The high credit limit on the card will help you to improve your score.
By observing your credit score, you will know how your credit gets affected by your financial actions. This will help you to avoid actions that affect your credit score in the future.
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Created on Feb 28th 2020 07:14. Viewed 167 times.