Credit score how to improve? Your credit score plays an important role
It helps lenders decide if you will get approved for loans and credit cards, while also determining the interest rates you have to pay. Thus, it is necessary to maintain a good credit score at all times.
Which factors affect your credit score?
The timely manner in which you pay bills, determines 35% of your credit score. Serious payment issues like charge-offs, collections, bankruptcy, repossession, tax liens, or foreclosure, causes credit score to go down.
Level of Debt
Debt level is 30% of your score. It is determined by aspects such as amount of overall debt you carry, ratio of your credit card balances to your credit limit, and relation of your loan balances to the original loan amount.
Credit History Age
Having an older credit age (the age of your oldest credit account) is good as it portrays that you have experience in handling credit. It is 15% of your credit score.
Types of Credit on the Report
There are two basic types of credit accounts – installment loans and revolving accounts. If you have both types of accounts on your credit report, it reflects well as it shows you can manage different types of credit. It constitutes 10% of your score.
Number of Credit Inquiries
An inquiry is initiated on your credit report, every time you submit an application that requires a credit check. Since it makes up 10% of your score, one or two won’t matter, but several inquiries, especially within a short period of time can negatively impact the score.
Make payments on time
Write down payment deadlines for each bill in a planner or calendar and set up reminders online. If possible, pay down your bills every two weeks instead of once a month as it lowers credit utilization.
Maintain proper age of credit history
Although it increases your total credit limit, it hurts your score if you apply for or open several new accounts in a short time period. If you must close credit accounts, close newer ones, so the age of your credit history isn’t affected that much.
Pay off wisely
If you use multiple credit cards and the amount owed on one or more is close to the credit limit, pay that one off first to bring down your credit utilization rate.
Consolidate your debts
Enroll in a debt consolidation program. Your score might drop temporarily, but as soon as you start clearing the debt with on-time payments every month, the score quickly improves.
Review credit mix
Your credit mix such as mortgage, student loans, auto loans, and credit cards make up 10% of the score. Adding another element to the current mix helps your score, as long as you make timely payments.
Last but not the least; take a peek at your credit report closely to check if it contains any errors. You might find certain problems and discrepancies that have previously gone unnoticed. Once you spot them, dispute the errors, because your score gets a boost once they are corrected.
Remember that it can take weeks and even months for your credit score to improve, so you have to be patient. Moreover, you have to manage your finances and credit situation properly, so the score doesn’t trend downwards again.