Personal finance

How to improve your credit score?

Understand one fact – you cannot improve your credit score overnight. There are some steps you can take on the path to having better credit. Higher credit score offers many benefits. The interest rates will be less and you will get better credit card offers. With commitment and proper planning, you can improve your credit score.

You have to start changing your credit behavior. A poor credit score can be a roadblock to rent an apartment or set up utilities. The first step is to find out your credit score. There are many online platforms where you can check your credit score. You can check out Credit Karma, Credit Sesame and Quizzle.

We’ve put together some of the best strategies that can help you to improve your credit score:

1. Pay bills on time

To improve your credit score, make bills or credit card payments on time. You can set up reminders online. When you don’t pay bills on time, your credit score will get hurt. Each time you miss a payment, your credit score will go down. Overdue payment will remain on your credit report for 5 years.

In case, you have trouble remembering, you can set up auto payments. That will come directly out of your bank account. Consistently paying bills on time will help you to raise your score within a few months.

2. Regularly review your credit report

It is very important that you review your credit report closely. Dispute the errors you find. Make sure that false information is removed from your credit report. To improve your credit score, you can get a free credit report every year.

You can request the correction and it will have a positive effect on your credit score. All information should be accurate on your credit report.

Ask following questions to yourself:

  • Are there any late payments listed that you remember paying on time?
  • Are there any accounts or applications for credit you don’t recognize?

3. Get a secured credit card

Security card requires a security deposit. For example, you can open a checking account and put $500 in it and get a line of credit for $500. Make payments on time to get the refund of deposit.

These cards are useful for consumers with poor or limited credit history. You can get a secured credit card with bad credit history. You can add a new account with a positive payment history.

4. Pay off your debts

You can see every debt from your credit report. Make sure your debts are legitimate. When your debt is “charged off” – it means that they don’t expect payment from you.

By mistake, if you make a payment on charged off account, it will reactivate your debt. This will lower down your credit score. When the credit bureau finds out that the debt is not valid, they remove it automatically.

5. Don’t close the unused credit card accounts

The age of your credit history matters. The longer the history, the better. Keep your accounts open. It will help with credit utilization as they increase your available limit.

You can demonstrate that you can manage credit and keep your utilization ratio low. Lenders prefer the consumers who have a history of managing credit responsibly.  You need to close accounts compulsory, then choose the new accounts first. Closing the accounts will have a negative impact on your credit score.

6. Use credit wisely

How you use your available credit? It has an impact on your credit score. Use your credit cards wisely. Whenever you use credit cards, make sure you pay on time. This way you will be able to avoid hurting your debt to credit ratio.

Many companies offer credit cards with 0% interest rate. You can try getting that type of credit card. The catch is – you need to have a good credit score to qualify for this type of card. You have multiple credit cards – it does not mean you use it without giving a second thought. No one wants to end up having enormous debt. Be wise and use credit cards in a smart way.

7. Create a plan to improve your credit score

From the credit report, you will know what you did wrong. You can create an action plan to avoid the same mistakes. Create a list of tasks you need to complete your credit score. Start with paying off your debts. Don’t close unused credit cards. It is a quick fix strategy. It will not help you to improve credit score.

Do not open a new credit account to obtain a new loan. This way you will increase the credit you already have. Implement your action plan and see how the plan impacts your credit scores.

These tips will help you to save money and skills to maintain a good credit score. Be responsible and handle your finances successfully. Have good payment history and enjoy perks of credit score.

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