Your credit score is important if you want to be considered for credit cards, loans, mortgages, and other financial products. The three-digit is based on several factors, and the higher the number, the more chance a company will lend you money. We take a look at 13 ways to improve your credit rating and keep it that way:
Pay Bills on Time, Every Time
This golden rule of any financial agreement is to make payments in full and on time. Late payments can significantly damage your credit score, so make sure you set up automatic payments or reminders to ensure on-time payments. If you’re experiencing financial difficulty, you should talk to your provider, and they may offer a payment holiday or agree to allow you to pay at a later date.
Prioritize Debt Repayment
Before you think about going on a spending spree or saving some of your monthly salary, you should focus on paying down high-interest debt. You should focus on the smaller debts first and gradually move on to getting rid of larger debts. Having fewer debts will motivate you to keep your finances on track, and having fewer credit accounts open at once will boost your score.
Keep Credit Card Balances Low
Use less than 30% of your credit limit on each card. A lower credit card utilization ratio demonstrates responsible credit management and will instill confidence that you can meet repayments when taking out new credit. If you’re always at the top of your limit, it will give companies the impression that you are constantly living in debt and cannot manage your money effectively.
Don’t Max Out Your Cards
Even if you can pay your balance in full each month, maxing out your cards can negatively impact your score. You should aim to only use your credit card when absolutely necessary and lose the habit of automatically putting small purchases on it as they can all add up,
Become a Credit Card Authoritative Figure
If you don’t have a credit card, you should consider getting a secured card to establish a credit history. Responsible use of these cards over time will build a record for when you want to take out other financial products. This is especially good to boost your credit rating before applying for a mortgage.
Don’t Apply for Too Much Credit at Once
Multiple credit card applications in a short period can trigger inquiries that can lower your score. Each time you apply for a new line of credit, a hard inquiry is placed on your credit report. These inquiries can temporarily lower your credit score, even if you aren’t approved. You should be strategic about applying for new credit by waiting six months between applications.
Check Your Credit Report Regularly
You’re entitled to a free credit report credit bureau annually, and various apps, such as Credit Karma and Expedia, offer free monthly reports. Some banks can also help you view your report online so you can review them for errors and dispute any inaccuracies promptly.
Keep Old Accounts Open
A long credit history with responsible management can positively impact your score. Therefore, consider keeping older accounts open, even if you rarely use them or they become inactive.
Avoid Co-Signing Loans Lightly
Co-signing for someone else’s loan makes you liable for repayment if they default. You may want to help people, but even family members and close friends can impact your credit score.
Be Wary of Closing Unused Accounts
Unless accounts have monthly or annual fees, closing them can shorten your credit history, potentially affecting your score. If an unused card has annual fees, consider canceling it, but weigh the impact on your credit history as it can boost your score by a significant number of points.
Address Debt Collection Issues Promptly
Unresolved debt collection issues can wreak havoc on your score. Work with a debt collector to create a repayment plan or explore debt settlement options. The worst thing you can do is put your head in the sand and think you can pay debts off the following month. You should address issues early on and speak to your bank for support.
Monitor Your Credit Score for Improvement
Many credit card companies and banks offer free credit score monitoring tools. You can track your progress and celebrate milestones. This can be very motivational for your overall finances and can often lead you to make changes for the better, such as reducing your credit card use on frivolous items such as daily coffees or unused subscriptions.
Check public records
Public Records, such as bankruptcies, foreclosures, and tax liens, can severely damage your credit score for several years. You should investigate any records you don’t think are accurate and dispute them if necessary.