Having a good credit score has several benefits. It can help you get a new mortgage or apartment easier while letting you off the hook for interest rates that can cost higher. Also, higher interest rates can increase your credit lines and loans you need to repay.
Additionally, improving your credit score can also help you apply for a credit card faster. So, here are six tips that will help get you started.
1. Know Your Credit Reports
Seeing and knowing your credit reports help to identify how you can increase your credit score since all its information is based on them. A credit report records all the history of your payments, repayments, credit, and debt management. It also tracks down details about closed accounts, repossessions, and bankruptcies.
You can get a credit report copy through TransUnion, Equifax, and Experian. These are the three major national credit bureaus where you can get a free report once every year. The following are factors on your credit report that can increase your score:
- On-time payment history
- Low to no balances on credit cards
- Combination of various loan and credit card accounts
- Minimal new credit inquiries
- Older credit accounts
2. Aim For A Low Credit Utilization
The credit utilization ratio contributes to at least 30% of your total credit score. This factor can be obtained by dividing the amount of credit you use by your total credit amount. Credit bureaus generally use your credit card statement balances for the calculation, which means you still have utilization even after paying your monthly dues.
Generally, the best way to keep your credit utilization ratio low is to use only 30% of your total credit card limit. If you can, keep it at 10%.
The following are ways you can achieve a credit card utilization ratio of below 30%:
1. Charge only essential purchases, such as groceries or gas.
2. Use your various credit cards to split your purchases.
3. Pay extra every billing cycle for single large purchases.
3. Be A Credit Card’s Authorized User
When you have a family member with a good credit score and who owns a credit card, they can make you an authorized user of that card. Doing this can increase your score, especially when the card possesses a long account history, on-time payments, and a minimal credit utilization ratio.
4. Leave Dormant Accounts Open
Your credit score has a portion that includes how long you started to have credit accounts. An older average credit age makes you more favorable to possible lenders. With this, don’t close your old credit accounts, especially when you still have balances left to be paid. Doing the opposite and closing these accounts can increase the credit utilization ratio and decrease your available credit.
5. It’s All About Diverse Accounts
When you have multiple credit accounts, it can mean that you have mastered responsible credit management. Different accounts can refer to owning a credit card, a car loan, and a home mortgage. Each account can positively affect your credit score.
When you pay loans in full, they can last for 10 years on anyone’s credit report. Additionally, it will be easier for you to qualify for the same loan as well as get a good credit score.
6. Always Pay On-Time
One of the easiest ways to help rank up your credit score is to always pay on time. This factor is one of the most influential ones affecting your score. Even when you are only paying the minimum amount, you are keeping your account’s good standing while also avoiding late fees.
Your Credit Score Matters
A good credit score can do wonders for your financial stability. Not only will you have an easier time getting approved for loans and mortgages, but you may also be able to qualify for lower interest rates. This can save you a lot of money in the long run, so keep your credit score as high as possible.
Biswajit Rakshit is a professional blogger and writer. He loves to write on various topics.