A Quick Guide to Improving Your Credit Score

Credit scores are three-digit numbers that verify and determine our creditworthiness. These scores range between 300 to 850. You’re more likely to get loan approvals and favorable interest rates with a higher credit score.

Your credit score is derived based on the information in your credit reports, which is significant in future loans, expenses, and other financial needs. If you struggle to improve your credit score, this post provides tips. We will also briefly discuss why improving your credit score is essential for better financial management and transactions.

Importance of Improving Your Credit Score

Your credit score is vital because it is the numerical prediction of your financial behavior. It determines whether you’re likely to repay loans on time. Moreover, an improved credit score can qualify you for loans with better interest rates and terms.

Insurance companies, creditors, lenders, landlords, and debt collectors evaluate your credit score to decide if they will approve your mortgage refinance, loan, or credit card applications. These financial authorities and companies use it to outline the credit limits and interest rates you’ll receive. Furthermore, employers, utility providers, and government agencies may also check your credit score.

Credit scoring includes the following:

• Payments history
• Current unpaid debts
• Your number and type of loan accounts
• Length your loan accounts have been opened
• Available credit usage
• New credit applications
• Foreclosure, bankruptcy, or debt sent to collection, if any

How To Increase Your Credit Score

When you have a high credit score, you are considered a low-risk borrower. As such, more banks and lenders will compete to offer you the best perks, fees, and rates. Conversely, people with poor credit scores are considered high-risk borrowers. Their poor credit scores can affect their rental housing, car rental, and insurance applications.

The tips below can help you improve your credit score and avoid getting a poor one:

Check your credit reports

Before working on improving your credit score, take the time to check and review your credit reports. They can help you know what needs improvement and enable better financial management.

When reviewing your credit reports, check for aspects that influence your score positively or negatively. This way, you’ll know what needs to be improved. For instance, if your credit cards have high balances, you should work on lowering them. Similarly, if you have a history of paying on time, you must maintain that consistency.

You can request free credit report copies from the Annual Credit Report website in the US or call the hotline (877) 322-8228. You may also download, print, fill out, and mail the request form to the Annual Credit Report Request Service office.

Keep track of bills

Your payment history could significantly impact your credit score. For example, your on-time payments are recorded in your payment history. These timely payments can help increase your credit score. In a way, avoiding late payments can be the easiest way to increase your credit score.

To avoid late payments:

• Create a tracking system, whether paper or digital, to log and track your daily, weekly, monthly, and annual bills.
• Set due-date alerts on your phone to know if deadlines are coming up.
• Automate your bill payments.
• Consider charging your bills from your credit card. It’s a great strategy to help you pay the monthly balances efficiently.

Diversify your finance accounts

Diversifying your accounts means having multiple accounts for different purposes. However, you can’t create multiple accounts impulsively. Every account should serve a purpose. For example, one ideal credit mix may include a utility credit, credit card for miscellaneous fees, mortgage payment, and business loan.

Credit diversity typically covers 10 percent of credit scores. It lets banks and lenders know you can manage various credit types. While it’s not necessarily the most influential factor, it can be a helpful way to improve your score.

Request for a credit limit increase

If your income has increased and you have maintained a positive credit history, you may request a credit limit increase. When your balance is consistent while your limit increases, you can lower your credit utilization ratio, which helps your score.

However, before making the request, plan how to maintain your spending habits to avoid maxing out your credit balance.

Consider debt consolidation

If you have many outstanding debts, getting a debt consolidation from your bank or credit provider is ideal. Debt consolidation enables you to combine your loans into a single payment. This arrangement makes it easier to manage and pay your loans. You may even get lower interest rates if you only have a single payment to repay. It can help you clear debts faster, which helps your credit score.

Track your credit progress

If you want to track your credit score regularly, you can use credit monitoring services. They monitor your borrowing behavior and creditworthiness. Most of these services are free.

Moreover, credit monitoring services can alert you of potential fraud and identity theft, such as unauthorized attempts to access your credit card. This feature allows you to report suspicious activities to your credit company immediately.

Get Quick Loan Approvals With a High Credit Score

Building and improving your credit score doesn’t happen overnight. You don’t make on-time payments in one day and expect your credit score to increase. It takes time and discipline. However, you can boost your credit score to get quick loan approvals and the best rates if you follow the tips above.