Garnering the highest credit score can reward you on many occasions, including when planning to refinance your mortgage, bouncing back from terrible credit history, and looking for credit card approval. Below, you will learn simple tricks to improve your credit score, whether creating new credit or rebuilding the old scores after dropping.
Credit scores are a measure of financial security any financial savvy person should have. With these scores, lenders can quickly tell how financially responsible you are and your flexibility in repaying the loans. Calculations for credit card scores depend on the information available in your credit report. Aftermath, a three-digit number is obtained to gauge your financial health. However, all lenders may not use credit scores to approve your new loans. After all, there are several techniques creditors can use to determine if one is financially reliable and good or poor at paying off the loans.
What is a Credit Score?
A credit score is a three-digit number summarizing your credit history. The digits ranging from 0 to 999 are calculated based on the information available on your credit report. The information included in the credit report is collected from your previous creditors, including bank and cell phone service providers. In addition, the data is collected from creditors you borrowed from in the past and sent to registered credit bureaus, including Experian, for assessment. Credit scores play a crucial role in approving loans and credit cards to some lenders and creditors, including car dealerships, banks, and credit card firms.
These scores vary depending on the credit scoring model used. For instance, a TransUnion Consumer Credit Score ranges from 0 to 999. Scores from 0 to 486 are considered poor, 487 to 526 are unfavorable, 527 to 582 are below average, 583 to 613 are average, 614 to 680 are favorable, 681 to766 are good, and 767 to 999 are excellent. Let us now look at various tricks one can use to up credit card scores. Although it may take time, the reward can handle your financial health to another level.
Easy Tricks to Improve Your Credit Score
Assess your credit report
Major credit bureaus, including TransUnion, Experian, and Equifax, provide free credit reports weekly throughout the year. Use reliable sites like AnnualCreditReport.com and Credit Sesame to request your information and check mistakes that may be keeping your scores down. If you spot errors in your report, dispute them immediately to have them eliminated. Common mistakes you may encounter while reviewing your credit report include wrongly spelled names, addresses, and other people’s accounts with names resembling yours. Specific errors can be expensive, including non-operational funds considered functional, debts listed more than once, and accounts with wrong balance figures and credit limits. Suppose you alert the credit reporting agency about the errors in your report on time. In that case, the bureaus will investigate and respond quickly, improving your credit score.
Pay your bills on time
Low credit scores indicate that you pay off the bills late or use credit for an overextended time. Good credit scores show one has a desirable credit history, including timely payment of bills and low use of credit. If you default payment or a month or two, contact your creditor and make payments if possible. Nonetheless, ask creditors not to report missed payments to your credit bureau as it can significantly lower your credit scores. You may not be able to pay all your bills on time. For that reason, prioritize them to avoid financial challenges.
Pay for your credit card balances frequently
Making Micropayments throughout the month can lower your credit card balances. Instead of paying once per month, make multiple payments to reduce your credit utilization and up your credit score. Increased credit utilization is one of the factors that can significantly lower your credit score. For that reason, if you can manage to keep the credit card balances low with frequent micropayment, it can benefit your financial health.
Increase your credit limit without a hard inquiry
Increasing your credit limit while maintaining the credit balance can significantly reduce credit utilization, impacting your credit score. As you ask for an increase in credit limit from your credit card issuer, ensure you fall for “soft inquiries” that do not drop your credit score. However, go for “hard Inquiry,” including applying for new credit, auto loan, new credit card, and mortgage. You will likely lose credit scores. This will imply to lenders and creditors you are experiencing financial challenges.
Consolidate your debts
Financial health begins by paying off your debts. If you have nowhere to start paying off your many outstanding debts, go for debt consolidation loans from banks and other creditors to write off your debts. After that, you will have one debt to settle, and lower interest on the debt can help you become debt-free within a short time. Paying off your old debts can prevent incidences of your account being charged off by the creditors. Later, if you send money to the charged-off account, your senior debt will be reactivated, lowering your credit score. If the debt is charged off, your lender or credit union does not expect any payments.
Diversify your debts
Diversifying your accounts improves your credit score. If you have a mortgage, student loans, and auto loans account, consider adding another account to improve your credit mix. Diversified bills and early payments can help up your credit score.
Keep old credit accounts open
Unused credit cards have the credit history that matters as far as credit scores are concerned. You may be tempted to close them and open new ones to improve the credit profile. Closed cards go with their credit limit, bringing down your score. Use your old cards and new ones to avoid losing the long history that can improve your credit score.
The Bottom Line
The above tips can be helpful whether you want to build new credit or rebuild the old scores after dropping. It may take months to up your credit score, but as a financially savvy person, your patience will reward you. Review your credit history and consolidate your funds to improve your credit score. Get other tips for boosting your credit score above to take your financial health beyond.
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.