Having a good credit score can be very useful for so many things. When banks and lenders trust you more, you can get credit cards with low interest rates, your mortgage loan and lease applications get approved more easily, you get better insurance rates, and in some cases, you even get a higher chance of getting hired.
But sometimes, because of a number of circumstances, people end up with less than stellar credit scores. If you’re in a similar situation, don’t worry. Here are the steps you can take to steadily raise your credit score:
The first thing you should do is to review your credit report. According to Debt, you can ask for one free credit report every year from one of the three biggest reporting agencies: Equifax, Experian, and TransUnion.
Although you can have a lot of different credit scores from different lenders, they’re all usually similarly affected by common variables, according to Experian. The FICO score is one of the more popular scoring models used by lenders. It grants you a score between 300 and 850.
By understanding the factors that have the biggest impacts on your score, you can start your personal improvement plan.
Timely Bills Payment
The importance of paying your bills on time cannot be stressed enough when it comes to your credit score. Lenders usually consider your past bill-paying performance as a strong indication of how you’ll be paying in the future.
Paying your bills late or with less than the minimum amount agreed (or both) can hurt your score. And this doesn’t only apply to credit card bills and loans. Your student loans, auto loans, utilities, phone bill, and rent should all be paid on time.
Calendar reminders are excellent tools to keep you from paying late. Just make sure you allot an ample amount of time every month to pay those bills. Automatic payments are also a great option. If the deadlines don’t usually align with your income stream, you can have them moved to more convenient dates of the month.
The credit utilization ratio is another number that’s essential to your credit score. It basically states your average usage of your credit cards in relation to your total credit limit.
Aside from paying your bills on time, keeping your balance low will keep your credit utilization ratio down and also positively affect your overall credit score.
Another way to keep that ratio down is by keeping unused credit cards open. As long as they do not cost you anything in terms of annual fees, by keeping these cards open, you effectively reduce your overall credit card balance.
On the other hand, avoid opening new credit accounts. They can affect your score if they’re unnecessary because they increase the number of inquiries, and they can also tempt you to spend more and ultimately accumulate more debt.
It takes time to rebuild your credit score. Negative changes to your score take different duration before they no longer affect your score. For example, delinquencies usually last for seven years on your credit report. Some bankruptcies can last up to ten years.
Just be patient and pay your bills religiously. You’ll eventually see improvements to your score.