7 Tips on How to Raise Credit Score
Your credit score is one of the most critical components of your financial well-being. A favorable credit score can determine the kind of loan you get for your house, car or business. It can influence the rates you pay on credit cards, insurance and other services. The higher your credit score is, the better financial benefits and opportunities you will enjoy. Therefore, it’s essential to understand how to raise credit score. In this article, we will look at seven practical tips that can help you improve your credit score.
Pay down existing debts
Your credit utilization ratio is an important factor that determines your credit score. It is the ratio between the amount of credit you are using and the total credit limit available to you. When you have maxed out your credit limit or are using too much of it, your credit score will suffer.
To improve your credit score, you need to reduce your credit utilization ratio. The best way to do this is by paying down your existing debts. Prioritize high-interest debts like credit cards, and make extra payments whenever you can. The more you pay down your debt, the lower your credit utilization ratio will be, and your credit score will improve.
Make payments on time
Your payment history is the most critical factor that determines your credit score. Late payments can significantly harm your credit score. Late payments can remain in your credit report for up to seven years, and they can significantly impact your credit score and financial opportunities.
You can ensure timely payments by setting up autopay or scheduling reminders for payment due dates. It’s also essential to know when payments are due and prioritize paying them on time to avoid late fees and negative impacts on your credit score.
Check your credit report for errors
Your credit report is a summary of your credit history. It contains information about your credit accounts, payment history, public records, and other details that determine your creditworthiness. Credit reporting bureaus may make mistakes in reporting your credit information, which can hurt your credit score.
You can obtain a free copy of your credit report once a year from any of the three major credit bureaus (Equifax, Experian, and TransUnion). Check your report for errors or inaccuracies, such as incorrect personal information, accounts that don’t belong to you, or accounts that show late payments when you paid on time. If you find any errors, file a dispute with the credit bureau and provide evidence to support your claim. Errors corrected on your credit report may help improve your credit score.
Increase your credit limit
Requesting a credit limit increase from your credit card issuer can help improve your credit utilization ratio, which can result in an improved credit score. However, it’s vital to use the credit limit increase judiciously. It would be best if you did not use the increase as an excuse to spend more. Instead, use the increase to reduce your credit utilization ratio.
It’s also essential to note that some credit card issuers may initiate a hard inquiry on your credit report when you request a credit limit increase, which can temporarily lower your credit score. Therefore, be cautious when seeking a credit limit increase and do it only when you need it.
Use different types of credit
Having a mix of credit types, such as a mortgage, an auto loan, and a credit card can improve your credit score. Lenders like to see how well you manage different types of credit. However, that does not mean you should open a new account you cannot afford or don’t need. Instead, use the credit types you already have and use them positively.
You can use your credit card for everyday expenses and pay them off on time each month. For a loan, make payments on time and pay off the loan on the stipulated period.
Keep old credit accounts open
Account history is another important factor that determines your credit score. The longer your credit history, the better your credit score. Therefore, it’s advisable to keep old credit accounts open even if you rarely use them. Closing old accounts shortens your credit history, which can adversely affect your credit score.
However, it’s essential to ensure that the old accounts are in good standing. Accounts that are delinquent or have a negative payment history can harm your credit score. So before you decide to keep an old account open, make sure to check it for any negative information.
Seek professional help
If you’re struggling with debt and can’t manage your finances, seek professional help. Credit counselors or financial advisors can help you improve your credit score by helping you develop a budget or coming up with a debt repayment plan. You can also use credit repair agencies to dispute errors on your credit report.
However, before you seek professional help, do thorough research. Some credit repair agencies charge high fees, and some have been known to scam people. Make sure you understand their fee structures, and check their reputation before signing up with them.
Conclusion
Improving your credit score is essential for attaining financial stability. The seven tips we’ve discussed-pay down existing debts, make payments on time, check your credit report for errors, increase your credit limit, use different types of credit, keep old credit accounts open, and seek professional help, can help you improve your credit score. Remember, improving your credit score takes time and consistent effort. By adopting these tips, you can strengthen your financial well-being and unlock a world of new financial opportunities.