It’s a question that many people have on their mind when they start thinking seriously about their finances: How do I increase my credit score or how do I fix my credit score? While credit scores may seem puzzling – how they are calculated, which ones are used – consumer credit scores tend to follow some general principles. In this post, we’re going to explain some simple tricks to improve your credit score.
Increasing your credit score can take time. After all, credit scores are a measure of how trustworthy a borrower has been over the years. The good news? You can get started with these loan tips today.
let us Start with the basics of how you can improve your credit score.
How to Increase Your Credit Score
Raise your credit Score is important, but you may not have a clear idea of what exactly your credit score is. Do not worry; it’s not as complicated as you might think. Your creditworthiness is basically a measure of how reliably you are paying back money on loan. There are two main models that credit reporting agencies use to measure your credit score:
The three offices that do the reporting are Experian, Equifax and Transunion. Each of these offices receives information from various financial institutions that you are involved in, and that information determines your creditworthiness. The more consistently you have paid off loans, kept your loan usage low and all of your financial obligations under control, the better your score.
Both metrics range from 300 to 850, with most values above 700 considered good to excellent. If your score is below – or significantly below – Getting a loan at a good interest rate, or getting a loan at all, can be difficult. If you get a lower rating than you’d like, here’s what you can do to improve your score.
Request (and receive) a credit limit increase
If you’ve made regular required payments with your credit card, you can try asking the credit card company to increase the credit limit. You don’t necessarily want to do this to fund a purchase that you otherwise couldn’t have made. However, if your monthly balance is relatively constant, lowering your usage rate (a good thing) by increasing your credit limit.
For those who may not know that Credit utilization rate is the loan amount that is actually available to you. It’s basically your balance divided by your credit limit. So if u Increase your credit limit and keep the balance the same, the utilization will be lower. And that can lead to how you can improve your credit score.
Pay your bills on time
An easy way to build a solid loan is to pay bills on time. Among the many different sources of data that major credit reporting agencies use to assess your creditworthiness, it is quite important that you pay for your regular expenses on time.
It’s not hard to see why: if you make rental payments on a regular basis, it likely means you can make regular payments on a loan.
The trick, however, is that you may need to link your bank account to one of the services of the credit reporting agencies. If you’re curious, give us a call or visit the Experian, Transunion, or Equifax websites to see if your regular bill payments at each of these offices can be considered for your assessment.
- Pro tip: If you find it difficult to manage your bills, create a central list in which you list each of your bills – rent, water, gas, electricity, Internet – and on what day everyone should be paid. Or, even easier, just download the Mint appthat reminds you of upcoming bills and records your monthly billing expenses.
Show that you can handle different types of debt
Running out and taking on additional debt is probably not a good idea, but when you need a loan that you have never used before (e.g. a car loan for a new car or a private loan to consolidate credit card debt) consider taking it over and making regular payments for it; You may see a bump in your score. Lenders want to see that you can deal with different types of debt. So adding another type of loan and paying it back could have a positive effect on your score.
Here is an example. If you have paid off student loans (these usually fall into the “installment loan” category) but do not yet have a credit card (these usually fall into the “revolving loans” category) You could see an improvement in your scores just by opening this credit card account and withdrawing your balance regularly.
Open a new account and make payments on time
If you need extra credit, open a new account and use it responsibly (make payments on time, don’t borrow more than you can afford) can have the effect of increasing your score. However, do not forget that opening a new account that you can’t cope with (where you miss payments and / or take on more debt than you can afford) is likely to have the opposite effect: a decrease in your score. So it is a good idea to act responsibly.
This is how you keep your credit score high
Once you have your credit score close to where you want it to be, it is important to do your best to keep it in good standing. By sticking to the habits listed above, you can ensure that your credit remains relatively stable. It is good to note, however, that creditworthiness can fluctuate in some cases.
Don’t be surprised if your credit score goes down and then go back up from time to time. For example, maybe a month, you are using a larger amount of your borrowing due to some unforeseen expenses. This is not the end of the world, and with continued responsible debt management and credit use, your score should recover.
However, in general, here are some things you can do to get a high credit score once you get it.
Close accounts with care and caution
“I have too many credit cards“Is something that you may have heard or even thought of someone before. And for many that may be the truth. But having multiple credit cards on you won’t necessarily lower your score.
While closing credit card accounts looks like it will improve your credit score by making your life easier or more organized, sometimes it can have the opposite effect. Because when you close an account two things happen: (1) you lose all of the credit line you had, which can reduce your usage rate (see the first tip above) and (2) you will stop keeping that account in consideration Average age of your accounts. Typically, Scores want to see that you have had multiple accounts open and in good standing over a long period of time.
But here’s one big caveat: there are still plenty of good reasons to close accounts, credit cards, or other reasons. Maybe you can’t afford the annual fee or the premiums just don’t make it worth it anymore. Or maybe you are struggling with credit card debt and want to consolidate it into a personal loan. It’s important to remember: when there’s no good reason to close an account, sometimes it is wiser to leave it open.
However, if you want to close an account, don’t worry. The strain on your credit will likely be minor and likely to recover over time after you continue to responsibly use the other lines of credit that you still have open.
Be in control of your personal finances with Mint
Your creditworthiness is just a metric that helps you measure your personal finances. Maintaining a healthy credit score along with a manageable budget, a solid debt to income ratio, and steadily growing savings are all aspects of your financial wellbeing worth looking into.
Mint enables you to do this. By consolidating your financial information – from investments to upcoming bills – into one convenient dashboard, you can get a bird’s eye view of your financial health. Knowing when rent, bill payments, credit card payments, and loan payments are due each month can help you improve your credit score and keep track of it all while knowing how much you have left for other areas.
Remember, there is no silver bullet to building your credit score quickly. The above loan tips are just a few of the ways you can improve and keep your credit score high over time. But remember: permanent, meaningful score increases result from consistently strong credit behavior. In other words, don’t forget the basics: pay your bills on time, don’t take on more debt than you can afford, and be careful if you apply for too many accounts in a short period of time.