Understanding what affects a credit score and what makes it up are crucial to build or maintain a healthy credit score and to make good financial choices.
Some of the ways you can help improve your credit rating include the following. You can then put these into practice.
Pay bills on time
Obviously, it’s the most important — pay your bills on time or, even better, before the due date.
If you have a bill of $150 or more, it can be recorded as a default on your credit report if it’s 60 days overdue.
If possible, they’re best avoided as defaults are one of the more significant black marks that can show up on a credit report.
Pay off outstanding loans or debts
You do not have to stress over existing loans and debts if you paid them already. They can worsen your money issues and will also appear in your credit report until it’s paid off.
Note: Debts may remain in your credit report after you’ve paid them off, depending on the amount and how long it took to be paid.
Keep credit card balance low
It’s better to have a consistently low credit card balance than a higher one.
By switching to a credit card with a lower interest rate, or even one offering 0% for a certain period of time, you can reduce the size of your outstanding balance.
If you think switching credit cards is a good strategy for you, a balance transfer could be of help.
How To Improve Your Credit Score Click To TweetAvoid applying for any new credit
Another impactful action on your credit score is applying for a new credit product or loan — whether you end up being approved or not.
Lenders or credit reporting bureaus may frown upon the fact that you applied for new credit, despite being in a reasonably risky credit situation from the get go.
Although, applying for an additional credit product as a replacement to one of your current credit products (balance transfer on a new credit card) may help you improve your credit score — if utilised properly.
Cancel unused credit cards
Another thing that can affect your credit score is unused credit card. It’s better to cancel it so you won’t be considered a high-risk borrower if you have extra debt to settle.
Consolidate
Consolidation could be one of your options if you have multiple debts. With a consolidation loan, you only have one loan to worry about.
This helps your credit score. As you pay off the principal faster, the quicker you have to deal with the balance. Not to mention, there’s a tax break too!
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