Having a good credit score is vital to your life as it can help you get loans, mortgages, and even jobs. A higher credit score can save you money and stress, so it’s important to keep yours as high as possible. In this blog post, we will discuss seven simple steps that you can take to improve your credit score. Here are some pointers to help you build a better credit history.
What is a Credit Score?
Your credit score is a three-digit number that lenders use to determine your eligibility for loans and other lines of credit. Your credit history is the foundation for most personal loans. It’s based on your credit history, which is a record of your borrowing and repayment behavior. A high score indicates a good credit history.
FICO scores and VantageScores are the two most common types of credit ratings.. FICO scores are the most widely used type of credit score, and they range from 300 to 850. VantageScores range from 501 to990.
The first step to improving your credit score is to understand what your score means and how it is calculated. Once you know this, you can start taking steps to improve your rating.
Seven Steps to Improve Your Credit Score
Here are seven simple steps that you can take to improve your credit score:
1- Pay your bills on time:
This is one of the most important factors in determining your credit score. Payment history makes up 35% of your FICO score, so it’s important to make sure that you’re paying your bills on time, every time.
If you have trouble remembering to pay your bills on time, set up automatic payments through your bank or sign up for a service like Mint Bills.
Paying your bills on time will not only improve your credit score, but it will also save you money in late fees and finance charges.
Late payments can stay on your credit report for up to seven years, so it’s important to make sure that you’re staying on top of your payments.
If you have already missed a payment or two, don’t panic. You can still improve your credit score by making all of your future payments on time.
2- Keep your credit card balances low:
Credit utilization is the second most important factor in determining your credit score. It makes up 30% of your FICO score.
Credit utilization is the percentage of your credit limit that you’re using at any given time. For example, if you have a credit limit of $900 and a balance of $450, your credit utilization would be 50%.
By keeping your credit utilization below 30%, you can improve your credit score. This means that you’re using less than 30% of your available credit at any given time.
If your credit utilization is high, you can lower it by paying down your balances or by requesting a higher credit limit from your card issuer.
Some credit card issuers will automatically raise your credit limit if you have a good history of making on-time payments.
If you’re not sure what your credit utilization is, you can check it for free on Credit Karma or Credit Sesame.
Once you know your credit utilization, you can start working on lowering it. Lowering your credit utilization will not only improve your credit score, but it will also save you money in interest charges.
Credit card companies typically charge higher interest rates to customers with high credit utilization ratios. So, by lowering your ratio, you’ll save money on interest charges.
Lowering your credit utilization is one of the quickest and easiest ways to improve your credit score.
You can also improve your credit utilization by paying down your balances or by requesting a higher credit limit from your card issuer.
3- Use a mix of credit products:
Credit mix is the third most important factor in determining your credit score. It makes up 15% of your FICO score.
Credit mix refers to the different types of credit that you have. The most common types of credit are revolving (e.g., credit cards) and installment (e.g., auto loans).
Having a mix of both types of credit is generally seen as positive by lenders. Managing different types of credit responsibly demonstrates your ability to handle money well.
If you don’t have much Credit mix, you can improve your score by taking out a small installment loan, such as a personal loan or an auto loan.
You can also improve your Credit mix by adding a Credit card or a store Credit card to your credit portfolio.
Having a good Credit mix is one of the easiest ways to improve your credit score.
4- Don’t open too many Credit accounts at once:
Credit inquiries are the fourth most important factor in determining your credit score. They make up credit inquiries are when lenders pull your Credit report to check your Creditworthiness. Hard and soft credit inquiries are two different types of inquiries.
Hard Credit inquiries can stay on your Credit report for up to two years and can slightly lower your Credit score. They’re usually initiated by lenders when you apply for Credit, such as a Credit card or a loan.
Soft Credit inquiries are not factored into your Credit score and they don’t have any impact on your Creditworthiness. They’re usually initiated by you, such as when you check your own Credit score or when you’re shopping for Credit products.
If you have too many Credit inquiries, it can signal to lenders that you’re desperate for Credit or that you’re misusing Credit. This can lead to your loan applications being denied or to you being offered higher interest rates on loans.
You can improve your Credit score by limiting the number of Credit inquiries you have. If you’re shopping for Credit products, try to do it within a 14-day period so that all of the inquiries will be treated as one inquiry.
Read More: Apply Online Personal Loans For Fair Credit To Stabilize Your Financials
5- Keep old Credit accounts open:
Credit age is the fifth most important factor in determining your credit score. It makes up 15% of your FICO score.
Credit age refers to the length of time that you’ve had Credit products in your name. The longer you’ve had a credit account, the better your Credit score will be.
If you have Credit products that you no longer use, you can improve your Credit score by keeping them open. This will help to lengthen your Credit history and show lenders that you’re a responsible borrower.
You can also improve your Credit age by taking out new Credit products and paying them off on time. This will help to establish a good Credit history.
Having a good Credit age is one of the easiest ways to improve your Credit score.
6- Deal with collections accounts:
Collection accounts are the sixth most important factor in determining your Credit score. They make up
Collection accounts are when you fail to pay a bill and the lender sends your account to a collection agency. Collection accounts can stay on your Credit report for up to seven years and they can have a major negative impact on your Credit score.
If you have a collection account, you can improve your Credit score by paying it off. Once the account is paid off, the collection agency will report the account as “paid” to the Credit bureaus. This will assist you in improving your credit score.
You can also improve your Credit score by negotiating with the collection agency to have the account removed from your Credit report. This is called a “goodwill adjustment.”
If you have a collection account, you should try to pay it off or negotiate for a goodwill adjustment as soon as possible.
7- Get help from a Credit counseling or Credit repair agency:
Credit counseling and Credit repair agencies can help you improve your Credit score.
Credit counselors will work with you to create a Debt management plan. This plan will help you pay off your debts and improve your Credit score.
Credit repair agencies will dispute negative items on your Credit report. This can help to improve your Credit score.
If you’re having trouble improving your Credit score on your own, you can get help from a Credit counseling or Credit repair agency.
Conclusion:
Improving your Credit score is important if you want to get Credit products with favorable terms. You can improve your Credit score by paying your bills on time, keeping old Credit accounts open, and dealing with collections accounts. following simple steps:
By following these simple steps, you can improve your Credit score and get Credit products with favorable terms.
If you have any questions about improving your Credit score, please leave a comment below. Thanks for reading
