Credit scores are way more important than you think. It is like your saving grace in today’s time, especially if you want to achieve a lot. If you’re looking at your credit score now, ask yourself this: would this score help me throughout my financial life? If your answer is yes, then you’re doing fine. But if you have doubts, then this article is for you.
To simply put, your credit score is a three-digit number that lenders look into to determine your creditworthiness. By creditworthiness, it means how responsible you are in using your credit score. Honestly, credit scores are more than just a number, and today’s the time to look into it seriously. Read below to know the ways on how to improve your score.
Table of Contents
1. Pay Your Bills On Time
Perhaps one of the most simple yet effective ways to up your credit score is to pay your bills on time. If you pay on time for six months, you can see significant changes in your credit score. And the offers you’ll get will also be tremendous! Visit Crediful now, and you’ll indeed have a buddy that you can rely on to further your credit score.
Also, late payments stay on your credit report for a long time, seven years to be exact. That’s why you need to start paying your bills on or before the due date. Start by organizing your bills and budget your money wisely. You can also use tools that can help you to manage your payments. Remember this tip, and you’re surely on the way to a higher credit score.
2. Know What Affects Your Credit Score
Knowing the factors that affect your credit score is also an advantage. This is important because it gives you insight into improving your score and, ultimately, improving your creditworthiness. Below are the five factors affecting your credit score.
Your payment history is an essential factor of all because it reflects your transactions. Missing one payment or paying bills late will undoubtedly hurt your payment history. Also, lenders use your payment history to help them decide whether you’re trustworthy or not. Payment history accounts for 35% of your credit score, so be sure to use the tip above: pay bills on time!
Your credit usage is the second most crucial factor. And this includes the total credits you have used, how much you owe on your different types of accounts, and more. Also, your credit utilization ratio measures your debt compared to your available credit limits. All of which accounts for 30% of your credit score.
Age of Credit Accounts
The length of your credit accounts is also a factor that you need to look into. Your credit history makes up 15% of your overall credit score. Long credit history is helpful because it will give lenders the impression that you’re doing a great job with your credit.
Another factor lenders consider is how many new accounts you have applied for, and the last time you opened an account. This factor makes up 10% of your overall score, and what’s important to remember about this factor is to avoid a hard inquiry from lenders.
Types of Credit
A mix of different credit types is another excellent way to better your credit score, which accounts for 10%. Owning various kinds of credit will surely give you the boost that you need to up your score. That’s why don’t be afraid of having different credit types, and it will help you a lot.
3. Make Regular Payments
Sure, making micropayments and paying your bills on time are the simplest ways to boost your credit score, but so does making regular, frequent payments. That’s right. Paying regularly and making multiple payments can undeniably change your credit score in an instant. It can also significantly affect your credit utilization.
4. Keep Old Accounts Open
Almost all advisers will tell you never to close old accounts. And this is good advice because closing accounts have a severe impact on your credit score. Closing an old account will lead to a higher credit utilization ratio, and as a wise person, you don’t want that to happen.
Keeping old accounts will give lenders a favorable judgment towards you, especially if your old accounts’ payment and credit history are outstanding. If it does not cost you any money, then better keep those old accounts open.
5. Mix and Match Your Credit
As stated above, having different credit types is a factor that can significantly contribute to bettering your credit score. These credit types may be categorized into two: revolving credit and installment credit. Both of these types come in secured or unsecured forms.
- Revolving Credit. The most common types are credit cards and lines of credit. From the word itself, revolving credit is a credit that is renewed when you pay off the debt, and you are allowed to borrow a certain amount. So, the more you borrow, and the more you pay off your debt on time, the better your credit score will be.
- Installment Credit. On the other hand, installment credit has a fixed length and end date. In simpler terms, a loan. Some of the most common loans are car loans, mortgages, private personal loans, and student loans. With installment credit, you’ll know how much you will pay every month and how long.
6. Discipline Is Key
Everything stated above guarantees a boost on your credit score, but all your hard work will not pay off without discipline on your end. Discipline is vital when trying to up your score because you’ll end up going on a vicious cycle of borrowing and paying off debt without it. As a responsible adult, you need to have self-control in terms of spending your money.
Having self-control is a precursor to being disciplined enough to know the difference between your wants and needs. Don’t waste precious money on things that are not important. Instead, set a goal or a plan and stick to it.
Your credit score reflects your financial health. That’s why it’s essential to maintain it so that you can avail yourself of exclusive offers from lenders. Use the ways above to help you improve your score and ultimately improve your financial status. And you’re welcome!