Good credit opens the doors to acquiring personal loans and securing business opportunities.
Without good credit, it becomes difficult to afford necessities like vehicles and mortgages. Bad credit can even get in the way of starting or running a business.
If you have bad credit, you likely want to improve your score and remedy your situation. Improving your credit score can be essential for having good finances and getting loans for things like starting a business or getting approved for an apartment.
Here are 5 ways you can raise your credit score.
Correct Your Credit History
Credit bureaus like Experian, TransUnion, and Equifax organize and manage your entire credit history.
Your history includes every credit card you’ve opened, any credit check made by a lender and whether or not debt was handled accordingly.
Sometimes this credit report has errors that affect your score. An incorrect address; duplicate records of debt, fraudulent charges marked as delinquent are a few examples.
Every year these bureaus send out credit reports, giving you the chance to fix these inaccuracies. Each issue has to be reported to each agency, which means you’ll want to examine the reports from each bureau. Making these corrections is an easy way to ensure your credit score is honest and accurate.
Decrease Your Debt to Credit Limit Ratio
Maxing out a credit card is not a good way to build credit.
Using a credit card is proven to help your credit score, but only when using a small percentage and the entire debt is paid off each month.
Using too much credit and making the minimum payment has the opposite effect on your credit score. For example, if a card’s limit is $5,000 and you regularly spend $4,000 or more, this hurts your score.
There are a few ways to resolve this issue.
Ask your credit card provider to increase the credit limit, which changes the debt-credit ratio. This works well when you regularly pay the debt off.
You can also pay off the debt more regularly to keep the balance low. Pay twice monthly or when you make a credit card purchase.
Consistently Pay Bills On Time
Financial institutions want to know that you can manage debt well.
Letting credit card bills roll over to the next month tells the bank that you can’t manage the debt. You’ll also want to note that paying the minimum on your credit card balance is not the same as paying off the debt.
This also applies to financed purchases, like vehicles or homes. Delinquency on any debt is tallied against you, so make sure you’re paying off your credit cards and keeping up with your payment plans.
The best way to resolve this issue is to pay your debt in full on or before the bill comes due. Set up automatic payments through your bank or card provider so you never have to worry about delinquent payments affecting your credit score.
Eliminate High-Interest Debt
Debt can easily get out of control due to high interest rates.
When people have multiple credit cards and don’t pay them off properly, interest increases the total amount of debt. Pay as much debt off as possible on the credit card with the highest interest rate.
The longer the debt goes unpaid, the higher your debt becomes. Your debt increases at an exponential rate because the interest is based on the total percentage of your debt. This means that interest will increase as your debt inflates. If you let this interest continue to accrue, debt can become unmanageable very quickly.
Paying debt off is essential to reducing long-term financial impact. To avoid increasing interest rates, chip away at debts until they’re gone and use lines of credit sparingly in the future.
Credit providers and third-party companies can help you restructure the debt if it becomes too much. This form of debt relief restores control and minimizes the damage to your credit score.
Don’t Open Or Close Too Many Accounts
Good credit card deals come around and old accounts can go forgotten.
Opening too many credit cards too frequently can negatively impact your credit score. If those credit cards have fees, then you end up adding to the debt just keeping the card open. While closing old accounts can negatively have an impact on your score, it’s best to limit the amount of open credit cards you have at one time.
How many cards should you keep open?
You should rely on one or two cards for regular use. With these cards, you should focus on consistently paying off debt.
Take Control of Your Credit Score
Good credit is possible for everyone. With consistency and thoughtful choices, you can improve your score and open more financial opportunities as your credit score increases.
Come back to our website regularly for financial advice and more.
