Effective ways to boost your credit score

Through your actions and decisions, you can either improve or worsen your financial situation. If you have a credit account (personal loan, student loan, mortgage, credit card) then you also have a credit score. It is a three-digit number that tells your future creditor how creditworthy you are and how responsible you are with your money.

The question of the moment is: how do I quickly increase my credit score? The good news is this is possible in a very short time (usually, in less than a year). But, like everything that helps it takes a lot of effort on your part. If you want to increase your credit score as quickly as possible do Read on and find out about the methods

ELIMINATE BALANCES THAT ARE TOO SMALL

If you want to increase your credit score quickly, you’re going to have to use credit cards. But having a lot of cards is not beneficial. Here’s what you need to do:

  • Collect all your credit cards
  • Determine which ones have the lowest interest rates and offers the most benefits
  • Pick and use 1 or 2 of the best cards
  • Don’t cancel the other cards, just don’t use them
  • Be sure to use and fully reimburse the cards you use.
  • Never spend the entire maximum amount available and don’t be late on your payments.

LEAVE OLD DEBTS ON YOUR CREDIT REPORT

Often people think that old debts on the credit report are going to have a bad impact on their credit score. But it is quite the opposite. The credit history is the thing that contributes the most to your credit score. So, if you’ve had a credit card for 5 years, great. The more years you have, the better. And the more responsible utilization of the card, the better your credit score will be. Also, an old debt paid off on time is a great thing for your credit score.

CONTESTED ERRORS

It is important for the holder to regularly check the records for any mistake and if there is incorrect information or credit errors on your statement, dispute them. If you prove the error, the credit agencies will undoubtedly correct it and will make sure to avoid this glitch in the future.

Do not argue over a negative episode because it won’t improve your credit ratings, but will rather hurt and will become a hassle for you.

INCREASE YOUR CREDIT LIMIT

It is important to use your cards well when trying to improve the credit scores. But it is also very crucial to understand the given limit and not use more than 30% of the available amount. So, if you use your credit card for any purchase, consider increasing your credit limit. In this way, you will be able to continue using your card without spending more.

Remember though: if you’re not sure you can control your spending, don’t increase your limit.

PAY YOUR BILL TWICE A MONTH

If you don’t want to change your credit card limit, then make a habit of paying it back twice a month. This way, the report will show that you are not using all the amounts available each month. Just be sure to make payment before the end of the month and in full to keep your credit ratings high.

MAKE AUTOMATIC PAYMENTS

If your credit score has been affected by missed or late payments, then choose automatic payment methods. You can do this for:

  • Student loans
  • Personal loans
  • mortgages
  • Auto Loans

This will prevent you from missing payments that could seriously affect your credit score.

GET A GUARANTEED CREDIT CARD

If your credit score prevents you from getting a new card, then opt for a secured credit card with a limited and manageable deposit. Then use this card to pay for your groceries and other monthly expenses and pay this balance in full at the end of each month.

REQUEST A COPY OF YOUR CREDIT REPORT

It a responsible act to be aware of your financial history so request a copy of your credit report and analyze the report line by line to understand your financial situation. If you have tried to improve your credit score, but have not had the desired results, seek professional advice. In some cases, specialized help and support can be beneficial.

Although paying your balance on time is important for your credit score, it only accounts for 35% of your credit score. There are also four other determining factors:

  1. Use of credit (30%)
  2. Duration of credit history (15%)
  3. The number of inquiries about your credit report (10%)
  4. The types and variety of credit you have (10%)

In order to avoid unpleasant surprises, such as refusing a loan for a car or a house, or not being eligible for the best rates, here are six things to consider to improve your ratings.

1)     USE OF CREDIT (30%)

This is the second most important element in the credit score after the first that is to pay your balance on time. This is the total amount of your available credit that you are currently using. If you keep your credit cards and your line of credit just a little below the maximum, most of the time, lenders will not be inclined to give you more, says Brian Betz, credit agency loan advisor Money Mentors, at Morningstar.

To avoid this, find additional funds to reimburse these balances. First, check your fixed expenses if you can cut some of them such as useless subscriptions. Here, online banking will help and allow you to automatically put these amounts in your card balances.

2)     HISTORY OF CREDIT (15%)

Lenders are more confident of applicants who have a trackable track record in paying bills. You start accumulating a credit history as soon as you have a cell phone in your name or use a credit card.

3)     CREDIT INQUIRIES (10%)

Part of your ratings depends on the number of credit inquiries you have received in a short time. If you make too many requests, some will think you may be in a financial bind. So, don’t ask for new cards or loans unless you really need them.

4)     DIVERSIFIED CREDITS CARDS (10%)

It is better to have a mortgage, line of credit or car loan rather than a handful of credit cards. If you only have cards, you could add a line of credit and transfer certain transactions to it helping in creating a valid record for future purchases.

There are times when people fear debt so much that they do not have credit cards. This idea can backfire. Lenders may be more reluctant to advance money to you if you have no financial history.

 

CONCLUSION

Just because we always pay our bills on time doesn’t mean our credit rating is excellent. Many other factors can hurt our ratings without our knowing it, a recent Morningstar article reveals. Knowing these other things can avoid unpleasant surprises.