Your credit score determines your creditworthiness. It is an essential factor in helping lenders decide the loan terms for you. As they stand, credit scores are dependent on a lot of other factors, such as the length of credit history, payment history, the amount owed, and more. A low score means that you do not have a good credit history, keeping the lenders away.
Before applying for a loan, make sure you have a decent credit score. There is no quick fix to improving your credit score, but here are some practical tips to get you back on track.Improve Your Credit Score
Let’s get started with improving your credit score, one step at a time.
1. Get Your Credit Report & Settle Disputes
TransUnion, Equifax, and Experian are the firms in charge of your credit reports. You can collect your credit information from the financial institutions where you have opened your accounts. These institutions may include credit card companies, mortgage lenders, banks, utility companies, and more.
It is not unheard of for these reports to have some errors. This can be confirmed by verifying your credit reports. Start by verifying all accounts. In case of errors, go ahead and file a dispute with the entity that is responsible for the error. Settling these disputes in your favour can improve your credit score.
You can get your credit reports for free once every year. Make sure to visit Annual Credit Report to get your free credit report now!
2. Pay Your Bills on Time
Paying your bills on time is the key to improving your score. Make sure that you make your payments on time to establish credibility as a borrower.
Even if you have a high credit score and delay your payments by a month, you might drop 90-110 points.
Although the impact on your credit report declines with time, the negative mark stays on. Late and delinquent payments stay on your credit report for over seven years. To avoid this, set up payment reminders or schedule a specific time every month to make automatic payments.
3. Keep Your Credit Utilization to 30% or Less
Credit utilization is the portion of the total credit limit that you are using at a given time. You must pay your credit card payments on time to keep your credit utilization in check. Even then, there are times when it’s difficult to make payments on time.
Here is a tip. Make sure that your total outstanding balance does not exceed 30% of your total credit limit. Keeping it at 10% is excellent for improving your credit score. In case this doesn’t seem easy to you, ask your lender to increase your credit limit.
4. Keep Your Old Accounts Open
Having a longer credit age has a positive impact on your credit score.
If you have an old credit account that you no longer use, it’s time to activate it again. Closing a card with a balance on your other cards will increase your credit utilization ratio and lower your available credit.
But Be Patient
Please note that your credit score will not flip overnight. It takes time to work on the negative marks and improve your credit score. Nevertheless, these tips can help you get started. Make sure you don’t miss payment deadlines and have your spending in control.
But if all this seems overwhelming, you can always hire reputable experts to help you improve your credit score.