Your credit score refers to the three-digit number
that the lenders use to help them decide the likelihood of you paying on time
if they grant you the loan. Indeed, it is an essential factor in your financial
life. If you have higher scores, you will more likely qualify for credit cards
and loans with the most favourable terms. This can help you save money in the
end.
If you have a credit score far from where you want
it to be, then you are not alone. Indeed, improving your credit score takes
time. However, the sooner you address the issues, the faster that it will go
up. When you try the several steps included in this article, you can increase your
credit scores. Check the tips below now:
Don’t Close Unused Credit Cards
If you have unused credit cards, keep it open. If
you close your account, it may increase your credit utilization ratio. When you
owe the same amount but have fewer open accounts, it may lower your credit
scores.
Pay off your Debt, Keep Balances Low on Revolving
Credit
One important number in credit score calculations
refers to the credit utilization ratio. This is determined whenever you add all your
credit card balances at any time. Then, you divide that amount by your total
credit limit. For example, if you charge $2,000 for every month and your total
credit limit on your cards is $10,000, then your utilization ratio is
20%.
To determine your average credit utilization ratio,
read all your credit card statements from the past 12 months. For every month,
you can add the statement balances on all your cards and then divide it by 12.
That is how much credit you can utilize on average for every month.
Lending companies with credit cards to build
credit will like to see low ratios of 30% or less. Clients with the best
credit scores have very low credit utilization ratios.
Pay Bills on Time
Whenever lenders request your credit score and
review your credit report, they are interested in how reliable you are in
paying your bills. This is because past payment performance is one good
predictor of future performance.
You can influence your credit scoring whenever you
pay your bills on time each month. Whenever you pay late or settle your account
for less than what you have originally agreed can negatively affect your credit
scores.
Pay your bills on time. Lending companies
with credit cards to build credit refers to all bills and not just your credit
card bills or loans. Examples are student loans, auto loans, utilities, rent,
phone bills, and others.
Moreover, it is a good idea to use the tools and
resources available to you. Examples are the automatic payments and calendar
reminders to help you ensure that you get to pay your bills every month.
If you are behind on any payments, make sure that
you bring them current as soon as possible. The missed or late payments can
appear as negative information on your credit card report for seven years.
However, their impact on your credit score will decline over time. Remember
that the older payments have less effect versus the recent ones.
Open New Accounts as Needed
Do not just open accounts to have a better mix.
Unnecessary credit cards can harm your credit score in various ways. It can
create too many hard inquiries on your credit report and tempt you to overspend
and have more debts.
