Published By Blog Breed
Your capacity to borrow money for large purchases is heavily influenced by your credit score. Besides, a good credit score can also lead to cheaper interest rates and increased credit limits.
Since the credit score is based on your current debt and payment history, lenders will evaluate it to decide whether or not you are a good candidate for a loan.
So if you have a low credit score, things can get pretty complicated on the financial spectrum. However, the good news is that you can improve it using the following tactics:
Make Sure Your Credit Reports Are Error-Free
It is a good idea to check your credit score every now and then. For that, you will have to pull out a credit report and evaluate it comprehensively for mistakes. If you see an account you did not open, for example, it is likely that your information was misused, or perhaps it was mixed up with the information of someone else. In such situations, you can request a dispute to have the account removed.
In case the error is found on all three of your credit reports, you should file a dispute with each of the three credit bureaus. For each of the three major credit bureaus, the Consumer Financial Protection Bureau gives instructions on how to file a dispute online, over the phone, or by mail.
Stay On Top Of Payments
The easiest way to improve your credit rating is to pay all of your bills on time. Your VantageScore is heavily influenced by your payment history, which accounts for a whopping 35% of your FICO score.
Broadly put, you can change your credit score for good and keep it stable if you make on-time payments month after month, year after year.
If you have trouble remembering to pay bills by the due date, you may consider setting up reminders. You could also leverage the option of auto bill payment.
Get A Credit Card
If used wisely, a credit card can be an effective tool for improving your credit score. Most card issuers disclose account and payment information to all three major credit bureaus, but some do not.
Therefore, it is pertinent to choose the right credit card. If your credit card issuer reports to just one or two bureaus, you are missing out on a good opportunity.
Apply for a secured credit card if you have bad or average credit. Your deposit will serve as an insurance policy for the issuer in case you do not pay back what you owe. That being said, a secured card is just like other types of credit cards in terms of functionality, and it can assist in building your credit history.
Make The Most Of Free Credit Monitoring
A vigilant check on your credit is critical. A credit monitoring service can notify you of significant changes in your credit. As a result, you can track any suspicious behavior. A strong credit score can be ruined by fraudulent behavior, so it is necessary to constantly check your credit score and challenge any information you find to be incorrect.
Devise A Debt Repayment Strategy
Credit scores are not improved by moving debt from one account to another. Creating a realistic strategy to pay off your credit card debt is the best line of action. We would recommend you embrace the snowball strategy.
It entails paying down your highest-interest credit card bill first, then making minimum payments on the other cards. Once you have paid off your first card, you can transfer the funds you set aside to the card with the next-highest interest rate, and so on.
Mix Things Up A Bit
The credit mix entails the different types of accounts that appear on your credit report. Lenders prefer to see a combination of revolving and installment credit accounts, such as mortgages, student loans, and auto loans, even if it will not entirely make or break your credit scores. It could be a big advantage to borrow money in as many different ways as possible. However, taking out a loan solely to spice up your credit score is not a smart idea.
Do Not Frequently Apply For New Accounts
A hard inquiry will be reported on your credit report if you make an application for a new line of credit. And hard inquiries have the potential to temporarily reduce your score.
So before applying for a new credit card, do some research to see if you have a decent possibility of getting qualified. You do not want to take the chance of having your application rejected, which would result in a lower score.
For some types of loans, credit scoring models allow you to shop around without affecting your credit score. FICO treats several applications for an auto or student loan, and mortgage within a set time period as a single hard inquiry. These days might range from 14 to 45.