Bad Credit Score? Improve it with these Tips
Your credit score is probably the most important aspect of your financial health because it provides information to potential lenders regarding your level of responsibility where using credit is concerned. This means that the higher your score is, the better your chances will be for obtaining various forms of credit and/or loans. In addition, holders of higher credit scores will normally benefit from lower interest rates when borrowing money.
If you’re struggling with a low credit score, the good news is that there are steps that can be taken to improve it:
Start by Paying Down Revolving Credit Balances
If you’re able to pay more than the minimum required amounts on any outstanding balances you’re carrying, now is the time to do this. Paying more than the required amount will not only reduce the amount of interest you’ll pay over time, it will help lower your credit utilization rate as well – which will in turn improve your overall score.
The sooner you can pay off your balance each month, the better – and once repaid in full, your credit score will usually increase again.
Don’t Miss Payments
When determining credit scores, your actual payment history will be one of the most crucial aspects that are considered. As such, having a long history of paying on time – or even early – will go a long way in helping to improve your credit score.
Aim for 30% Credit Utilization or Less
Credit utilization refers to the amount of your credit limit that’s being used at any given time and it is the second most important factor when it comes to credit score calculations.
The easiest way to keep this ratio under control is to repay credit card balances in full each month. If this isn’t possible, your next best option is to ensure that your total outstanding balance is kept at 30% or less of your full credit limit. From there, you can start working towards getting this down to 10% or under – which will be ideal for helping to improve your credit score.
Request a Credit Limit Increase
When your credit limit is increased and your outstanding amount remains the same, it lowers your overall credit utilization virtually immediately. If your income has increased over the past year or two, you stand a fairly good chance of having your request for a credit limit increase approved – which will ultimately improve your credit score.
Check your Credit Report for Errors
Another way to increase your credit score relatively quickly is to review your credit report for any errors that could be affecting it negatively. You stand an excellent chance of increasing your score by disputing errors and having them removed as quickly as possible.
When it comes to improving your credit score, it’s important to remember that there’s no one solution that will work for everyone. It’s also strongly recommended that you obtain copies of your credit report from the various institutions such as Experian or Equifax annually, as this will allow you to spot errors and dispute them as quickly as possible.