Your credit score forms the most important measure of your financial health. It informs lenders at a glance how responsibly you use credit. The better your score, the easier you will find it to get approval for new loans or new lines of credit. A higher credit score opens the door to the lowest available interest rates when there is an availability of credit for customers.
If you would want to boost your credit score, there are a number of quick, simple things that you can do. While it takes a few months to see an improvement in your credit score, you can initiate working toward a better score in just a few hours.
Why Does a Good Credit Score Matter?
A good or excellent credit score saves most people hundreds of thousands of dollars over the course of their lifetime. Someone with an excellent credit score gets better rates on mortgages, auto loans, and everything that involves financing. A person with better credit ratings is considered a low-risk borrower. More banks are competing for their business and they offer credit to customers with better rates, fees, and perks. On the other hand, those with poor credit ratings are considered higher-risk borrowers, with fewer lenders. There are few lenders competing for people with poor credit scores and more businesses get away with high annual percentage rates (APRs) because of it. Additionally, a poor credit score affects your ability to find rental housing, rent a car, and even get life insurance because your credit score can affect your insurance score.
8 Tips for a Good Credits Score
1. Payment of Credit Card Dues On Time
In an era of retail consumer financing, you must pay all your outstanding credit card bills to improve your credit score. You must get into the cycle of paying the basic amount due on the credit card statements to avoid late payment charges. Paying dues on time not only prevents interest from mounting but also enhances your credit score.
2. Limit Credit Use
Try to use 30% of the available credit for you. This might help you to prevent damage to your credit score. On the other hand, if you choose not to use credit at all that might also affect your credit score. You should try to use your credit in a balanced way. Usage of your credit above 30% falls under the high credit utilization category. It is advisable to apply for fewer loans. Applying for multiple loans can have a negative impact on your credit score.
3. Multiple Credit Cards
Try to be prudent when applying for credit cards. If you have multiple credit cards and involve in high payments on credit, it might lead to counterproductive results. Whenever you decide to apply for a credit card always check your credit eligibility. Always ensure that you maintain a gap between making multiple applications for credit. This will help you from preventing lenders from thinking that you are chasing credit. Apply for credit cards only when you are in a situation to repay the credit taken on them. This will add points and help you to enhance your credit score.
4. Check your Credit reports
Look out for inconsistencies and errors in your credit report. Credit Bureaus are legally bonded to offer one free credit report to borrowers once a year. The report might contain errors like incorrect information, delay in updating the report, or delay in updating important details about you in the report. These errors can adversely affect your credit score. You can visit the official website of the CIBIL to check your credit score. You can fill out a Dispute Resolution Form in order to resolve issues.
5. Go for different types of Credits
It is advisable to include different kinds of credits in your portfolio. Your portfolio can be a mixture of personal and secured loans and long and short-term loans. This image of the portfolio can help to enhance your credit score. If you include this step you can increase your chances to get a high loan with a low rate of interest.
6. Increase your credit limits
If you choose to increase your credit limit it will lower your credit utilization ratio and enhance your credit score. If you overutilize the credit available to you beyond a certain limit you will fall into the category of a high-risk borrower. So it is advisable to increase your credit limit before you start spending.
7. Mention your old debts in your report
Your credit score reflects your past credit behavior and on the basis of that, the lender approves your loan application. So it is advisable that you keep your old good debt records in your report. This step increases your creditworthiness and has a positive impact on your loan application. You should also keep your good accounts active with good repayment history to enhance your credit score.
8. Do not give a hint of risk
The credit scoring models are designed in such a way that they pick up the early signs of stress and risks in a borrower’s profile. Try to avoid stretched cash flows and missing a Credit Card payment. These errors will be picked up by the credit scoring models and will affect your credit score adversely.
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Final Thoughts
Improving your credit score is a good goal if you have a plan to either apply for a loan to make a major purchase. It can take several weeks, sometimes several months, to observe a noticeable impact on your credit score when you start taking steps to turn it around.
You may require the best credit repair companies. These companies provide help to remove some of those negative marks. But the sooner you begin working to improve your credit, the sooner you will see the results in the form of a good credit score.