6 Ways to Improve Your Credit Score

By Admin
•
12 Apr, 2021

There are many benefits to a great credit score. A good credit score will attract lower interest rates on loans and give you access to the best credit cards. You may also need a good credit score when applying for insurance or when acquiring a new gadget on contract. A good credit score is also often instrumental when you're ready to get a mortgage on a home.

However, building a good credit score requires a little patience. If you're ready to apply for a mortgage or another important loan, here are six easy ways to improve your credit score within a short time.

1. Pay Your Bills on Time

Pay your bills on time to improve your credit score. If your accounts remain unpaid after 30 days, the delinquent report will show on your credit report for seven years, which leads to an even lower credit score. According to FICO, your payment history affects the score. To avoid late payments, set reminders to notify you of the due dates of payment.

For recurrent bills, auto-pay is your best solution. Most lenders will judge your ability to pay loans based on your credit card payments. It will be in your favor to pay your outstanding student loan, utilities, and medical bills in time.

2. Correct Credit Report Errors

Continuous monitoring of your credit report reveals errors that may lower your credit score. In a 2012 survey by the Federal State Commission, 26 percent of the respondents found potential errors in their credit report. Such errors reduced their borrowing abilities.

Most of the errors arise when you apply for a credit card under different names. Manual application may also result in a clerical error and the use of your ex-husband or wife's name on your report. Should you note any mistakes, contact your respective bureau for correction.

3. Know Your Risk Factors

Instead of going for the free credit report, purchase the complete statement from Equifax, Experian, or TransUnion, which lists your risk factors. When you know your risk factors, you can focus on areas that need improvement.

Your risk factors could be too many applications for a credit card in a year or a lack of mortgage. You will not be able to work on all your risk factors, but knowing them will help you find the best strategy to maintain a good credit score.

4. Apply for Different Credit Accounts

Different credit accounts, when appropriately utilized, become a tool to improve your credit score. Also, the same may aid in damaging the credit score. Only borrow money when you badly need it.

Any loan paid on time will show on your credit report a decade later. Such payments will qualify you for higher loans with an added advantage of a higher credit score. You can apply for credit accounts like a car loan if you don't already have one.

5. Manage Your Credit Utilization

Credit utilization measures the credit you have used compared to the credit you got from the lender. Lenders use credit utilization ratios to determine both their credit score and creditworthiness. Healthy credit utilization should be below 30 percent. While paying bills on time improves your credit rating, a higher credit utilization may negatively affect your creditworthiness.

6. Shop for Loan Rates Quickly

Many inquiries to lenders take a few days before actual lending lowers your credit score. Different lending agencies use different scoring models. According to Forbes, some may ignore inquires made in the past 14 days, while others ignore those made until 30 days later.

Since you are unsure which models are in use by your potential lender, making inquiries and shopping around for rates in a quick time frame may secure your chances of a better credit report. Also, rate shopping can help you save money on high interest rates.

To effortlessly boost your credit score and improve your chances of securing a good mortgage, follow these tips. To buy or refinance your home mortgage, contact us now for the best offers.