Improving your credit score can be very difficult and time-consuming, yet it’s absolutely necessary if you want to be financially healthy.
A higher credit score not only makes it easier to get approved for loans and credit cards but also can qualify you for lower interest rates, potentially saving you thousands of dollars over time.
Paying Bills Timely
The payment history is the biggest impact on your credit score. Even if you miss one payment, it can greatly affect your score negatively so it’s very important to be sure to pay all your bills on time. Setting up automatic payments or reminders can help you stay on top of due dates.
Buy Authorized User Tradelines
Another less commonly known strategy is purchasing authorized user tradelines. These are accounts that appear on your credit report.
As you buy tradelines, you basically add positive credit history to your credit report by being added as an authorized user on someone else’s credit account. However, this method should be approached with caution and conducted through reputable sources to ensure compliance with credit reporting standards.
Debt Reduction
Frequent debt accumulation can have a negative effect on your credit rating. Begin by making payments on unpaid balances, starting with the most costly debts. Keeping your credit card balances low relative to your credit limits (ideally under 30%) can also positively impact your score.
Diversify Your Credit
This will demonstrate that you can manage various types of credits wisely, as lenders check out whether you have different kinds of loans like secured and unsecured personal loans, home equity loans or lines of credit, mortgages, car loans and student loans.
Avoid seeking additional lines of credit without a good reason as this could be detrimental to your portfolio. For instance, it’s like showing you’re good at handling different kinds of financial responsibilities.
In similar manner, you might not use same tools all around the house; similarly using different types of credits means you’re versatile and dependable for lenders. However, it’s important to remember that if they don’t fit your needs then adding new ones would only be meaningless.
Refusing New Accounts
Each time you apply for new credit or a loan, there is usually an inquiry that can affect negatively on your credit score. Opening more than one account in a short period simply intensifies this situation. Instead, only get new credit accounts when necessary.
It may be quite tempting to open fresh credit card accounts when enhancing your credit score especially if they come with attractive short-term loans or initial incentives.
Always remember, however, that these inquiries and possible relief in the short term could actually disturb your long-term efforts of building up your credit. Every application you make can temporarily reduce your ratings.
Check Your Credit Reports for Mistakes
Mistakes on your credit reports can unfairly lower your score. Regularly look through your credit reports from the three main credit bureaus, which are Equifax, Experian and TransUnion to find any inaccuracies.
You can get a free report every year at AnnualCreditReport.com. Also dispute directly with the bureau that issued it in case you discover any mistakes.
