Perhaps the most significant measure of your financial health is your credit score. If you’re confused as to what your credit score is, it’s basically a way of showing prospective lenders how responsible you are at handling your credit. The higher your score, the higher the likelihood is that you’ll be approved for a new loan or new lines of credit. Having a high credit score is also a great way to access the lowest interest rates that are available when you do borrow money.
If you have a particularly low credit score, or just want to try and get it even higher, then these are some handy tips to help you get your score up!
Tip 1: Review Your Credit Report
This should be the first step in improving your credit score if it turns out that your credit score is particularly low. A credit report gives you a good indication of what sort of things are helping to improve your credit score, and also what is hindering it from being higher than it is.
There are a number of places that will provide you with a free credit score, and you’re able to do it for free once a year via AnnualCreditReport.com, these reports will then show you what’s going right, and what’s going wrong with your credit score.
Some of the factors to look out for that can contribute to an increase in your credit score are high amounts of one-off payments, keeping a low balance on credit cards, having a varied mix of loan and credit card accounts, minimal inquiries for new credit, and holding credit accounts for a long period of time. However, if you’re late making a payment, missing a payment altogether, or have a high credit card balance, then this will all have a detrimental effect on your credit score.
Tip 2: Sort Out Your Bill Payments:
Payment history is one of the biggest factors that can have an impact on your credit score, which is why it’s so important to keep the record of debts that you’ve paid off, as long as you paid them off in time.
The easiest way to ensure that you pay all of your bill payments on time is to create a simple filing system to keep track of the monthly payments that you make. This system can be either physical or digital, as long as it works for you, and if you decide upon a digital system, it will allow you to set up due date alerts so you know when the payment is due. Of course, if you’re confident that you’re going to have money in your account by that time every month, then the best option is to set up automated payments, so that you won’t be late making a payment, even if you forget.
Tip 3: Reduce Credit Utilization:
The amount of credit you’re using is yet another factor that goes into determining your credit score, so paying off your credit card balances each month is a great way to help improve your score. But if you’re unable to do this, just try to reduce the amount you’re using your credit card, getting it to under 30% is a massive improvement, and from there the goal is to try and get it under 10%.
You could also ask to raise your credit limit, as long as your balance doesn’t increase too, as this will help you to achieve that 30% utilization goal.
Tip 4: Limiting Requests For New Credit:
When looking to limit your requests for new credit, it is important to know that there are actually two different types of enquiry that you can make; a soft inquiry, and a hard inquiry.
A soft inquiry would typically consist of things such as checking your own credit situation, giving prospective employers access to view your credit history, a check done by a financial institution which you already do business with, or a credit card company checking your file in order to decide whether they want to send you a pre-approved credit offer. These sorts of inquiries won’t affect your score.
On the other hand, a hand inquiry will have an effect on your credit score, and an adverse one too. These sorts of inquiries include a new credit card, mortgage application, a personal loan with online approval, or another form of new credit. One hard inquiry should affect your credit score too much, but too many in rapid succession will, and the likelihood is that banks will see you as a bigger risk, meaning you may not get approved for things such as loans or mortgages.
Tip 5: Keeping Old Accounts Open
An underrated aspect of your credit score evaluation, the age-of-credit section looks at how long you’ve held your credit accounts, the older they are, the more favorably the lenders will see you. It’s important that you resolve any charge-offs, collection amounts, or delinquent accounts too, getting caught up is the best way to manage your future payments, and therefore increase your credit score.
Increasing your credit score might seem like a difficult task, but in reality with these 5 useful tips, you shouldn’t struggle to get your credit score up to a good number in absolutely no time at all, and from there, you’ll be able to get your finances back on track!