7 Useful Tips To Improve Your Credit Score

7 Useful Tips To Improve Your Credit Score

2019/02/25

There are plenty of things you can do to improve your credit score. Credit or FICO score plays a very important role in everybody’s financial life. If you have an impressive credit history with a high score, you can easily qualify for lower rates on loans, credit cards and even insurance policies.7 Useful Tips To Improve Your Credit Score

What is more, even landlords these days check credit reports of the applicants before deciding whether they should accept someone as a tenant or not. Likewise, if you are applying for job positions that require financial handlings and responsibilities, your employer will also accept you only if you have good credit. There are three major credit bureaus (TransUnion, Equifax and Experian) that maintain entries in your credit report.

They gather information from various parties who you are having financial transactions with, such as your lenders, credit card issuers, landlords and even utility service providers. Now that you understand the basics, following are those seven tips that will help you ensure good credit health.

Check Your Credit Report For Errors And Get It Corrected

Before you start working on other strategies to improve your credit score, the first thing you have to do is to review your credit report. Check each and every entry thoroughly to ensure that the details provided out there are correct and complete in all sense.

In general, there are often certain mistakes that people do not realize. For example, it is very much possible that you have made a bill payment, but it is still reflecting in your credit report as unpaid. You must file a dispute for all such errors immediately. The credit bureaus will investigate your claim, and if your claim is found to be true, they will make adjustments accordingly. Once those errors are removed, you will see a significant rise in your score.

Pay Your Monthly Bills And Debt Payments In Time

Another proven way to improve your credit score is by making all your bill and debt payments regularly and in a timely manner. If you make late payments, you will not just be charged a late fee, but it will also negatively affect your FICO score. It is very important for you to keep in mind that debt payments contribute to thirty-five percent of your credit score. If you do not make any default and pay all your bills in time, there will definitely be a significant improvement in your score; you can notice the chances within a matter of just a few months.

Pay Off Your Debts Faster

There are several factors that credit bureaus take into account to determine your score. For example, thirty percent of your score depends on how fast your debt balances are reducing. Therefore, if you want to improve your credit score, you should try to save more money so that you can pay extra toward those debt accounts where you owe a large sum of money. The faster your debts decrease, the faster your score increases.

Keep The “Debt To Credit Ratio” To Less Than 40%

Just because you have been provided a high credit limit by your credit card issuer, it does not mean you should make maximum use of it. Maxing out this limit and spending more than the limit allowed are some of the worst mistakes, as it seriously damages your credit score. Always remember, your “credit utilization ratio” or “debt to credit ratio” contributes to 15% of your credit report.

A general rule of thumb to improve your credit score is to keep this ratio to somewhere between 30% and 40%. It means if your credit limit is $1000, you should not use more than $400 in a given month. Besides that, you must pay off the balances in full every month. Making just the minimum monthly payment allowed by the credit card issuer does not lower your score directly, but since your credit card debt balances will keep on accumulating this way, you will eventually see a reduction in your score at a later stage.

Use A Good Mix Of Credit

If you stop using your credit card at all and even close all those accounts, it will negatively affect your credit score. It is very important for you to keep in mind that the different types of credit you are using determine 10% of your FICO score. Therefore, if you want to improve your credit score, make sure you are using a good mix of credit, such as a mortgage, a car loan and a credit card. Do not close your credit card accounts even if you are not using it. In fact, a better strategy is to use it for a small amount every month and keep making the full payment. This timely payment of credit card balance will help you raise your credit score by several points every month.

Negotiate With Your Lenders

If you are having difficulty in paying off your debts, you are advised to talk to your lenders and negotiate a more affordable repayment plan. If they accept a settlement or repayment proposal, request them not to report your debt payments to credit bureaus as “paid as part of a settlement program” or “paid partially as part of a negotiated deal”. Instead, request them to report your payments as “paid in full”. This way, effective negotiations will not just help you settle your debts, but it will also protect and improve your credit score.

Hire A Credit Counselor

If you owe a lot of debts and are having difficulty in handling things on your own, you can consider hiring a credit counselor for help. A credit counselor is an expert who will review your financial and debt situation thoroughly, will identify the weak points and the areas of improvement, and then, they will suggest you some strategies accordingly to bring your finances back on track.

They will teach you how to manage your income and expenses through an effective budget plan and how to save a lot of extra money every month so that you can pay off your debts and bills without any trouble. In fact, depending upon your specific situation, they can even negotiate with your lenders on your behalf.

Last, but not the least, you have to be consistent with your efforts if you seriously want to improve your credit score. Financial discipline and a strong determination to succeed play a very important role in this regard.

Photo Credit: Aaind.org

7 Useful Tips To Improve Your Credit Score featured personal-finance

MORE ABOUT 7 Useful Tips To Improve Your Credit Score

Historia amp