10 Tips on How to Improve Your Credit Score

Your credit score is more important that you may have realized. It doesn’t only affect your ability to take out loans and get a mortgage. It can also make it difficult to get accepted for telephone and similar contracts. Some employers will check your credit before they will offer a job as well. Your credit score determines how much you will pay for a loan too. If you have poor credit, lenders will charge you higher rates of interest. If your credit score is not as good as it could be, there are steps you can take to improve it. Here are 10 tips on how to improve your credit score.

1. Check the Accuracy of Your Credit Reports

There are three main credit reporting agencies that track people’s credit history. They are Equifax, Experian, and TransUnion. Each of these agencies keeps a record of your borrowing history. You can get a free copy of your credit report from each of these agencies once every year. If you want to improve your credit score, start by checking the accuracy of these reports. Credit agencies are not infallible. They do make mistakes and those mistakes could damage your credit rating. If there are any inaccuracies on any of your credit reports, you should dispute them with the agency.

2. Plan to Reduce Your Debt

The first and most obvious way to improve your credit score is to repay some of your debt. Look at what you spend each month and see if you can reduce your outgoings. Try to leave more money available for repaying loans and credit cards. Reducing the debt burden is not easy for some people. Even so, the sooner you start reducing your level of debt, the sooner you will begin to repair your credit score.

3. Pay Your Bills on Time

Paying bills on time or early doesn’t improve your credit score. Paying them late, though, may have a negative impact on your credit rating. Don’t wait until you receive a reminder to pay bills. Always pay bills by the due date. 

4. Avoid Applying for New Credit

When you are repairing your credit score, you should avoid applying for any new credit cards or loans. Adding to your debt burden is the last thing you want to do. Applying for more credit will damage your credit score. Whenever a lender does a hard credit check, it has a negative effect on your credit rating. Even if you don’t take out the loan. A hard credit check is the type of check that a lender makes as part of their decision-making process.

5. Pay Off More than the Minimum Payment

Always aim to pay more than the minimum repayment on your credit cards. Paying the minimum payment on credit cards has little impact on the underlying debt. If you have long-term debt on credit cards, it is a very expensive way to borrow money. If you don’t reduce your credit card balances, you will end up paying back many times what you borrowed.  To improve your credit score, you should be aiming to bring credit card balances down to 30 percent of your credit limit. The utilization of your available credit has a major impact on your credit rating.

6. Don’t Move Debt Around

There are loans available that reduce your monthly repayments by consolidating your debts.  This type of loan may help get you out of a short-term financial fix. They can, though, also further damage your credit score by adding to your debt burden. Some people take out a consolidation loan and allow the balance to build up again on their credit cards. That leaves them in worse potion than they were in before they took out the loan.

7. Don’t Close Accounts

As you pay off your debts, don’t close credit card accounts that you are no longer using. Keeping old credit card accounts open will improve your credit utilization percentage. If you have credit available, it suggests good financial management on your part.

8. Look at Your Mix of Debt

Having a good mix of different types of credit will improve your credit score. The two main types of credit are revolving credit and instalment credit. Instalment credit has fixed monthly instalments and a fixed term. Revolving credit is where you have a minimum repayment and no fixed term. Having a mixture of both types of credit is better for your credit score. In fact, if you only have credit cards, it may be beneficial to take out a small repayment loan.

9. Focus on the Top 5 Credit Score Factors

Focus your efforts on improving the five most important credit score factors. The most important of these is making your repayments on time. Then look at your credit type mix, your credit utilization, and how often you apply for credit. The final part of the equation is any negative information against your name. Do whatever you can to avoid defaulting on loans. Always talk to lenders if you cannot make a repayment. They may be able to help you with an alternative repayment plan.

10. Be Persistent

Repairing your credit will take time. You must be patient. Pay your bills and loan repayments on time. Check your credit reports every year for inaccuracies. Avoid applying for or taking out new credit. In time, you will begin to see your credit score improve.

Conclusion

Improving your credit score may seem like a big task, but it is achievable. In the long-term, it will save you money and make it easier for you to get new credit. Following the above tips will help you repair your credit rating and help you to manage your finances. The sooner you start, the sooner you will have your credit score repaired.