How to raise your credit score
For most people, attaining a good credit score is a lifelong goal. Understanding the benefits that come along with a good score is perhaps the sole reason why many diligently pursue it. Aside from just access to loans at affordable interest rates, a good credit score can save you lots of money on other fronts. It is worth noting that some factors are considered before a credit score is arrived at. They including one’s credit history, payment history and the level of credit held by an individual at that particular time.
Financial experts advise that all the money decisions you make should be towards improving your score and by extension your fortunes. Because credit scores take into account past years of financial behavior. It, therefore, follows that one can progressively improve their standings with time. This thinking is perhaps why most financial experts use the marathon and sprint analogy in correlating these two diverse areas.
So let’s look at some of the ways you can raise your credit score
Paying off your balances
A $25 balance on one credit card would certainly not feel so burdensome on you. After all, you could offset such a small debt quite effortlessly at month’s end and still have loads of money, right? But what if the same amount is replicated in about five other cards? This would undoubtedly leave a dent in your finances. Lenders have varying interest rates on the credit they extend. It is advisable to be prudent while choosing your preferred lender. Similarly, summing up all your small debt balances in all your cards and paying them off would be a smart financial move. Limiting yourself to a selected number of cards with the best interest rates would do more in boosting your credit score.
Don’t delete your bad credit history
Every so often, people will make efforts at sanitizing their credit histories in an attempt to avail a falsified representation of facts. This is a significant undoing. A poor credit score in one’s formative years is acceptable. A change in tidings in the subsequent years is a good indicator and is always seen as a sign of growth.
Furthermore, perfect credit history with no instances of default seems so good to be true. It will automatically raise some eyebrows. In most jurisdictions, financial regulations stipulate that records can be destroyed after the lapse of a particular time span. Your records would, therefore, be phased out inevitably.
Settle bills on time
Saving or settling bills are the major competing priorities on most people’s minds. Saving for that dream gadget, car or house may often affect prompt payment of bills including your monthly credit installments. This negatively impacts your credit score and hurts your chances of getting a favorable interest rate in future. Most lenders will often shy away from extending credit to defaulters. The stipulated pay dates should be honored, and you should ensure that you settle your credit obligations promptly. Failure to pay up for long periods of time or just not paying at all only serves to worsen your credit score. There is a need to adopt a shoestring budget during harsh economic times to honor your credit obligations.
Manage the debt you have
The fact that debt has a cost implication is unknown to most people. The cost aspect is meant to awaken frugality and proper financial management skills. You should always strive to make the most out of your expenditure no matter how small. Always keep your debt utilization limit as low as possible by not maxing out the entire credit extended to you. Maintaining a 30% reserve of your credit limit shows that you are a thoughtful spender and sparing in your use of money.
Get a credit card
Getting a credit card is an excellent way to set yourself up for credit advances. The merits of a credit card over the traditional loan schemes is the fact that you get a set credit limit that gets reset every time you pay off your initial debt. What’s more, you determine the charges and the repayment amounts.
It is, however, vital that you have a plan on how to repay that money because the convenience associated with running a credit card can give one a false impression of financial ability. Limiting yourself to one credit card is an excellent way to ensure that you keep your debt levels manageable.
Check your credit reports
Reading through your credit reports is an excellent way to evaluate your credit score. In most countries, credit scores are issued out by banks that serve as lenders. While in other countries, credit reference bureaus are tasked with this responsibility. A credit report is vital as it not only shows you your score but also advises you on the possible improvement areas that could significantly alter your credit rating for the better. Smart spending habits should, therefore, be a lifelong endeavor and not when you intend to make a huge purchase. As long as you remain focused, the results will undoubtedly be seen in the long run.
This is perhaps the most understated way of improving your credit score. It is worth noting that it takes time to build a good credit score. An excellent rating is an illustration of the sum of the smart money moves you’ve made over the years. It would, therefore, be futile pushing for a score that can warrant an expensive purchase in a span of say a month. You need a lot of time to continually work on getting better and achieving that desired score.
In summary, debt is a significant financial instrument that can be of tremendous value if well utilized. Conversely, if credit is taken out without proper planning or due regards on how it will be repaid, it can be disastrous on both the economic and social well being of an individual. So, before seeking for credit, be sure to plan well in advance about its usage and how to repay it.