It is very rare for a person to be aware of their credit score, let alone know how to increase it. During our day to day life we are rarely bothered by our credit score, so it may seem like an unimportant concept. However, having a good credit score is very important in our adult lives.
A good credit score ensures that banks approve us for personal, home, education, or any other kind of loans. A good credit score also enables you to avail credit cards with better transaction limits. Thus, increasing the credit score is necessary to apply for loans and credit cards. This article discusses 7 most powerful tips to increase your credit score quickly.
1. Pay attention to Credit Card Balances
One thing that affects your credit score is the balances on your existing credit card. One needs to be very careful and meticulous regarding their credit card balances. Both overusing your credit card and not using your credit card can affect your credit score adversely. An important factor contributing to this how much revolving credit one has on them versus how much of it they are actually using.
It is encouraged that you keep this percentage low in order to achieve a better credit score. The optimum percentage is advised to be 30% or lower. In conclusion, you should pay down your credit card balances and maintain them so that they are always low.
2. Don’t use a lot of credit cards
A lot of people tend to think that as long as they have low balances spread out over multiple credit cards, they will be ok. They divide their expenses over multiple credit cards. For example, they will have one card with a 50 dollars balance and another with a 60 dollars balance. They think that this is better than having one card with a 110 dollars balance. However, this is not an accurate assumption.
During the calculation of your credit score, they take into account the balances of all your credit cards. Having small balances spread out over multiple credit cards actually creates something called a nuisance balance on your record. Nuisance balances are never good for your credit score. Thus, having a card with 110 dollars balance is much better than having multiple cards with nuisance balances. This prevents you from seeming like a financially irresponsible person.
3. Don’t eliminate paid debt from your report
Many of us seem to think that having any kind of debt on our credit report will be bad for our credit score. We try to eliminate records of a debt from our credit reports as soon as our debt is paid. However, this is a very obtuse thing to do if we want to increase our credit score. The whole purpose of a credit score is to judge how financially responsible a person is and how well they can pay off their debts. Thus, the record of a debt that was paid of nicely is surely going to affect your credit score positively.
Always make sure to leave detailed reports of your old paid loans on your credit report, so that the banks can see that you are actually capable of paying off loans and are trustworthy enough to be given a loan. This in turn increases your credit score.
4. Pay your bills beforehand
Even though seems like a no-brainer, this is a step a lot of people forget and fail at. Even if one is late for their payment by one day, it affects their credit score a lot. Thus, one should be careful that they all their bills punctually and on time. It is often advised that you pay your bills before the actual deadline as that is of lesser risk.
There are multiple reminder apps that one can install on their phone so that they do not forget to pay their bills on time. Furthermore, it is also necessary that you pay all kinds of bills on time for a better credit score, from your mortgage bills, rent to electricity and phone bills. There is no order of importance as far as bills are considered.
5. Create a good credit history
Time and experience contribute a lot to the building of one’s credit score. You should be patient while building your credit score. A good credit score is not achieved overnight, it takes a lot of time. Thus, having a good credit history is very important for achieving a good credit score..
The manner in which you can improve your credit history is by creating a long trend of well-payed bills, and low credit balances. If you do need to increase your credit score urgently, you can make small purchases on your credit card and then pay them off well before the due date. This also ensures that you have a good credit history and lets the bank know that you are capable of paying off your own bills.
6. Regularly check your credit score
One way of having a good credit score is through always paying good and close attention to it. You should always check your credit score regularly and make sure to eliminate the faults that your credit report may have. By checking your credit score regularly, you are aware of the distance that you have to cover to get a good credit score. With this on your mind you are less likely to make financially irresponsible decisions.
7. Know when to apply for loans
Your credit score during one part of the month is not necessarily the same during another part of the month. Mortgages, bill payments, purchases affect your credit score a lot. So, you should be careful that you apply for a loan only when your credit score is at its highest. Check your credit score regularly over a few weeks and know the general trend in the fluctuations of your credit score. Apply for a loan or a credit card only when you know that your credit score is at its highest.
Financial experts agree that a credit score above 700 is a good credit score. It indicates that a person is financially responsible, disciplined in their financial decisions, and has a stable source of income. These are the factors that a bank looks for when it decides whether to approve a person for a loan or a credit card. By following the tenets mentioned in this article you can also increase your credit score and get approved for loans and credit cards.