How to improve your credit score
Dragging along your bad credit report can certainly be a major nuisance. They just keep sticking to you like that few extra pounds of weight you are trying to lose. A bad credit report will leave you without the possibility to access cheaper money, and you will always be stuck in expensive loans and pay a lot of money every month on interest. But, there is a solution to improve your credit score, just like there is a solution to losing weight.
Quick fixes, like in all other aspects of life, are not recommended when it comes to improving your credit score. Most certainly, a quick fix is bound to backfire on you and cause even greater problems in the near future. Consistency and discipline are the keys to avoiding problems like these.
Paying your bills on time is a major component of keeping your credit report healthy. Be consistent and try to pay your bills right when they are due and put an effort to keep this level of discipline. Simply put, pay your bills on time and your credit report will enjoy it. By all means, try to avoid unpaid bills so that the collection agencies will not send you notices and warnings. When the creditors see that you are a disciplined debtor, they will recognize you as a preferable client and offer better, cheaper loans with better payment terms.
Also, do your best to keep your credit score good by closely monitoring your credit card balance. It is favorable to keep your card balance at around 30% or lower. This means that you should always have at least 30% of your maximum credit available, if not more. The smaller the percentage of your revolving credit against your used credit is, the better your utilization ratio will be. Hence, the better your credit rating will be.
Another good method to achieve significant credit repair is to get simply rid of those annoying credit card balances you have spread out over many different credit cards. Your credit score will often depend on the sheer number of balances you have. This is why it is much wiser to pick a card with the best terms (lowest interest rate) and use it more compared to other credit cards you own. Hence, act diligently and pay off all those little annoying balances and keep one or two cards you know you will use for your day to day needs.
You also might be wondering how you can improve your credit score if you have some old debt on your report. Many people, instinctively, rush to remove the old debt from their credit report, so it is not visible. This is a very common mistake. Picture it like this: if you have straight A’s in school, you will not erase them from your report book as soon as you finish school. You will leave them there as proof of your hard work and success. It is pretty much the same with your credit report, because the creditors will want to see your old debts paid in full and on time, and they will have this information when they see your debt history. This way, the more quality debts you can accumulate and keep them in your credit history, the better your credit score will be.
Further on, one more good advice to improve your credit score is to keep track of the calendar and be careful about the number of times you apply for credit in a short timeframe. Multiple credit applications in a short period of time can be detrimental to your credit score. Every time you apply for credit, a note will be made on your credit score and the creditors will usually interpret this as a way to use more credit. Of course, this does not apply to home, car or student loans, where multiple applications (applications made with several potential creditors) will be explained as a tactical approach with the goal to achieve the best possible loan terms.
It may seem somewhat counterintuitive, but taking out a mortgage loan to buy your home is a good thing for your credit report. Even though your overall level of indebtedness is higher, creditors will see your mortgage as a sign of stability. Thus, a mortgage is not a bad thing for your credit report because it will imply you have a stable monthly income and that you plan on sticking to a particular place for a prolonged period of time. Another thing which will be a major sign of stability is a wedding ring, and a married person will usually enjoy a better credit rating compared to a single person with comparable credit reports.
Several other things are important to note when it comes to improving your credit reports. Taking risky moves like using your credit to invest in new, unexplored business ideas or pawning some items can also hurt your credit score. In general, risk is a manageable factor and can quickly be assessed. Hence, creditors do not like to see hasty moves and sudden misses of payments because they usually indicate either current or future financial tension. Try not to do anything that could hint risk.
Finally, keep track of your credit score so you can be aware of possibilities which are open to you and that you can take action and improve your credit rating if needed. If you want to apply for a new loan, your creditor might not use the same credit score that you have used. Yet, all the major financial aspects on which credit scores are based have to be in this report, and these will surely provide a good picture of how good or bad your credit rating is. This way, you can more actively seek new ways to improve you credit rating. Thus, a smart move would be to take out new credit reports regularly and keep an eye on your spending trends. This way, you can always be one step ahead of the game and keep your credit score exactly the way you want it.