A poor credit score can have a big impact on your life today and your future. It can prevent you from being approved for a credit card, or a loan and can even prevent you from becoming a homeowner. Luckily, there are a few tactics that can boost a person’s credit score.
It is important to note that while the tactics in this article could help to improve your credit score over a period of time, there is no quick fix to a poor credit rating. It can take a few months for your actions to take effect, but it will be worth the wait when you see the score and your financial opportunities increase. Here are five simple ways to improve your credit score.
Simple Ways to Improve Credit Score
Check Credit Report for Errors
Your first step should be to check your credit report. There are several companies that provide credit reports. Some will charge a fee for more detailed information, but legally, you are entitled to a free report every year. Look at your report for any information that might be out of date or incorrect, as it could be impacting your score negatively.
Make Additional Re-Payments on Credit Cards
Many people make the mistake of just paying off the minimum amount each month, which will not reduce your debt, but another mistake is only paying off the card once per month. If you are using your credit card to pay for goods and then waiting until the end of the month to clear it, your monthly report may be compiled at a time when your balance is high. Consider making several smaller payments throughout the month to prevent this from affecting your score.
Request a Credit Limit Increase
If you cannot afford to reduce your balances, you could ask your creditor to increase your credit limit. If you have used up all your available credit on your card, this will reduce your credit score, but increasing that limit will reduce your credit utilization. Of course, this only works if you do not use the additional credit and continue to work to reduce the balance.
Take Out a Personal Loan
If you can get approval for a small personal loan, it may be worth taking one out and, most importantly, making all your payments on time. For those with a short or limited credit history, personal loans like those from OneMain Financial can actually help build positive credit history when you make your payments on time.
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Negotiate your Debts
Debt and outstanding utility bills will have a big impact on your credit score. While you cannot erase them from your credit report, you can try to get them reduced so they will be settled more quickly. Try contacting your creditors to see if they will accept a payment plan or a lesser amount in return for a quicker settlement. Visit Investopedia.com for advice on negotiating with creditors.
Pay your Bills on Time
Timely payment of your credit card bills, loan installments, and other debts is crucial for maintaining a good credit score. Late payments can significantly impact your score, so make it a priority to pay your bills by their due dates. Setting up automatic payments or reminders can help you stay on track.
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Reduce Credit Utilization
Credit utilization refers to the amount of available credit you’re using. Aim to keep your credit utilization ratio below 30%. This means if your total credit limit is $10,000, you should try to keep your balances below $3,000. Paying down existing debts and avoiding maxing out your credit cards can help improve your credit utilization and positively impact your score.
Maintain a Healthy Credit Mix
Lenders often look for diverse credit histories, including different types of credit such as credit cards, loans, and mortgages. Having a mix of credit demonstrates your ability to handle different types of financial obligations responsibly. However, avoid opening unnecessary accounts or taking on excessive debt just to increase your credit mix.
Regularly Review your Credit Report
Obtain a free copy of your credit report from each of the major credit bureaus (Experian, Equifax, and TransUnion) once a year. Carefully review the report for any errors or discrepancies that could be negatively impacting your score. If you find any inaccuracies, report them to the credit bureau and request corrections.
Avoid Frequent Credit Applications
Each time you apply for new credit, it triggers a hard inquiry on your credit report. Multiple inquiries within a short period can raise concerns for lenders and potentially lower your credit score. Be selective and cautious when applying for new credit accounts.
Build a Positive Credit History
If you’re new to credit or have a limited credit history, consider starting with a secured credit card or becoming an authorized user on someone else’s credit card. Responsible use of these accounts can help establish a positive credit history over time.
Be Patient and Consistent
Improving your credit score takes time and discipline. There are no quick fixes or shortcuts. Consistently following good credit habits and responsible financial practices will gradually enhance your creditworthiness.
Conclusion
Remember that everyone’s credit situation is unique, and the specific actions you need to take may vary. If you find it challenging to manage your credit or need professional assistance, consider consulting with a reputable credit counseling agency or financial advisor. By implementing these strategies, you can improve your credit score over time and enhance your financial well-being. Remember, the key is to be proactive, responsible, and patient throughout the process.
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