Your consumer credit score is important.
Creditors and lenders will use your score to assess your risk as a borrower. With a good score, they are more likely to approve your loan applications and give you favorable loan terms, including lower interest rates and higher credit limits. You will find that more financial doors are opened to you.
On the other hand, a lower credit score will shut doors that you’re hoping to get through. You might find that your loan applications get rejected, or at the very least, your loan terms are restrictive. You might get higher interest rates, higher minimum deposit requirements, and lower credit limits.
These doors don’t have to stay shut forever. As long as you boost your credit score, you can improve your chances of getting better loans with better terms. So, how can you boost your credit score? These are some strategies that you can try.
A single error on your credit report could be lowering your credit score. For instance, your credit report could list a credit account that you never opened. It’s possible that the credit bureau added an account of someone with a similar name to your report, mistaking it for your own. If that’s not the case, it could mean that you are a victim of identity theft — someone used your identity to open up an account without your knowledge.
So, if you’re worried about your credit score not being high enough, you should read through your credit report to see whether you spot any errors. Before you do, learn what information is on your credit report to get a better understanding of the various sections and reporting processes. This information could make your investigation that much easier.
What if you find an error? You can dispute the credit report error with the credit reporting agency. You will want to provide any documented proof that disproves the error with your message. If you think that you’re a victim of identity theft, you should go to the Federal Trade Commission’s identity theft website and follow the recovery plan there.
Paying Bills on Time
One of the factors that influences your credit score is your payment history. If you have a habit of paying your bills in full and on time, it will be reflected positively in your score. If you’re inconsistent with these payments and often collect late penalties, your score can suffer. So, to boost your credit score, you should make an effort to manage your bill payments better.
What can help you pay bills on time?
- Using bill-tracking apps.
- Using calendar apps to remind you of due dates.
- Automating payments to providers.
- Following a budget to guarantee that you can afford bill payments on time.
Reducing Credit Use
Another factor that influences your credit score? Your credit utilization — essentially, how much credit you are currently using. If your credit card and line of credit balances are close to their limits, your credit utilization ratio is going to be quite high, and a high ratio tends to negatively impact your credit score. This is because a high ratio puts you at greater risk of making late payments, maxing out accounts, and defaulting on loans.
So, if you’d like to boost your credit score, you should work on lowering your credit utilization ratio as much as possible. Pay down the balances sitting on your credit cards and lines of credit.
Limiting Hard Inquiries
Whenever you apply for a new credit account, the provider will run a hard credit inquiry to investigate your credit score. A hard credit inquiry can temporarily lower your credit score.
So, you should try to limit the number of hard credit inquiries you receive throughout the year. How? Try to apply for multiple auto loans and mortgage loans around the same time — this is called rate shopping and will only count as one hard inquiry instead of multiple inquiries. And consider pre-approved credit accounts instead of going out of your way to apply for new ones. Pre-approved accounts will use soft credit inquiries, which do not hurt your credit score.
Doing all of these things could boost your credit score over time. Then, more doors could open for you.
Arnab Dey is a passionate blogger who loves to write on different niches like technologies, dating, finance, fashion, travel, and much more.