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10 Ways To Improve Your Credit Score

Improve Your Credit Score

According to a 2018 two-year study report by Hormoff, as an assistant professor of Economics and Public Policy at New York University, credit card score is a critical aspect of everyone’s financial life. This explains why most consumers are more aware of it, even trying their best to improve it. Simply put, a credit score is your payment history summarized and presented numerically. The score varies between 300 (poor) to 800 (excellent). Most lenders prefer a score of 720 for lending money and abhor 620 as they view it as problematic. While there is no cutoff for having a good or bad score, paying your bills on time and using your credit card is judiciously lower. The credit utilization ratio goes a long way to improving your credit score. Peer into the article to learn about these and other strategies in detail.

1. Review your credit reports periodically.

While many credit card owners may not treat this strategy with the weight it deserves, recent studies show that some 20% of people who reviewed their credit payment history saw an improvement in their credit score after some time. Interestingly, some 26% of users have a credit dispute at any given time, which periodic reviews can fix. This is because the three major credit bureaus (Equifax, Transunion, and Experian) allow clients to review their credit report like Credit Sesame. Using at least one of the credit reporting agencies through the annualcreditreport.com site, you can review and identify an error and dispute it. When the error is removed, your credit score may improve. Thus, it does not hurt your credit score but may improve it in the long run. Besides, the federal government provides you with such a free credit report once annually.

3. Double your monthly payments.

As stated previously, there are many tricks and tips to raise your credit score. However, nothing works better than paying your bills on time and using your credit card sparingly. One strategy of improving two tenets is tapping on the billing cycle and paying twice a month rather than just once. This lowers your credit utilization ratio, a critical factor in determining the FICO Score, and ultimately increases your credit score.

4. Apply for new credit, but do so cautiously.

The FICO Score is determined by five criteria, including the New Credit score, which should be way below 10% for you to stand a chance of boosting your credit score in a matter of months. While regularly applying for new credit may help boost your credit score. It can equally hurt your score, especially if you do so willy nilly over a short period. The same may happen if your first card is pretty new and you keep applying for new credit.

5. Keep in touch with your lenders.

Sometimes, things are just out of control, and you find yourself having a missed payment when it’s past the deadline. It’s your responsibility, and not the issuers, to contact them and explain your situation. Do so promptly and be ready to set up a workable payment plan to avoid high balances. You may fear speaking to your creditors when you cannot pay but they may be able to help. If you don’t, negative reports are being sent to the credit bureaus.

6. Keep unused credit card accounts open and active.

You may develop your financial life and have access to lower interest rates for an auto loan and installment loan, among other credit rewards. At such times, you may be tempted to close your old unused credit cards and their accounts. While this may seem ideal as you no longer use the charges or the credit cards, it may affect how much your credit score could. Remember, improving your credit score is a synergistic effect of combined efforts, including those stemming from the unused cards. So, rather than closing the old unused cards, near the new ones to keep the length of credit history impressive.

2. Set up payment reminders.

With so much going on in your life, you might find yourself having a late or missed payment. This paints a dire picture of you as a beneficiary to the lenders. They may make a horrible payment history to the credit bureaus and set you in for a bad score. Why then don’t you try setting up payment reminders only, e.g., with the Google Calendar? Since you use your phone often, you will see the reminders and pay your bills on time, increasing the chances of improving your credit score.

7. Be cautious about paying off debts.

We already talked about reviewing your credit history with the credit agencies as one strategy to improve your credit score. Besides helping you identify credit history errors, the review also gives you a chance to see debts that lenders have ‘charged off.’ For such, the issuers do not expect you to pay further. However, if you don’t realize this and keep paying the debts, you reactivate them. So, instead of improving your credit score, the move only lowers your score.

8. Have diversified debt

As far as your circumstances may allow you, diversify your credit accounts. Even if you may have enough to pay off a car in one shot, choosing to take an installment loan may go a long way to boost the credit score, as long as you are on time with the stipulated payments. You can also try student loans and personal loans, all in an attempt to improve your credit score.

9. Pay attention to your credit utilization ratio.

Besides paying off credit balances on time, paying keen attention to your credit utilization ratio may mean a lot when it comes to improving your credit score. This ratio is the fraction of your revolving credit over the available credit. If your credit score should improve, be sure to keep the balance below 30%. Better off, make it less than 10%. You may find yourself qualifying for 0% interest rate credits that can only be attained with a low credit utilization ratio.

10. Consider credit monitoring services. 

For many people, credit utilization is all about using credits and paying off. However, if you want to improve your credit score, you must do more than the obvious. Run regular credit monitoring. This step has many advantages, which are overlooked. With credit monitoring, you will be up-to-date with your latest financial promotions. You will also know when anything is amiss. This way, you tap into the advertisements and fix the misses.

Conclusion

Strategies to improve your credit score are critical as they can help elevate your financial life. Tapping these strategies and utilizing them allows you to do all it takes for the lenders to see that you are a responsible beneficiary. 

Rose Rosie is a writer for the personal finance website, Joy Wallet, which provides readers with useful information, resources, and tools to help maximize their financial fitness.

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