Your credit score plays a huge role in the financial aspect; it’s a signal to lenders determining how likely you are to repay a loan or your credit card debt. The higher your credit score, the better your chance of securing credit cards and loans suited to your requirements.
However, maintaining a good credit history can be challenging for some people. This is especially true for small business owners trying to get a loan even with bad credit. Hence, many people are consistently trying to improve their credit scores to ensure they get better financial deals. While improving your credit score takes time, the sooner you start working on it, the quicker you’ll get there.
So, if you’re one of the many people who need to boost their credit scores, here are seven things you can do:
Subscribe to a credit catalogue
Many people overlook credit catalogues as a means to improve their credit scores. Catalogues for bad credit can help you boost your credit score if you meet these payments on time.
Even if these payments are small, the fact that you’re able to pay these on time and not miss them shows lenders and Credit Reference Agencies that you’re ready to manage a stable line of credit and, hence, demonstrate financial responsibility.
Apart from this, credit catalogue companies are also quite flexible in terms of payment options. When you’re purchasing something, you can choose to pay the entire sum at the time of purchase or pay it in installments.
Moreover, if you’re purchasing something expensive, like a refrigerator, you can draft a payment schedule that allows you to spread the cost over a few months. Lastly, you can also delay your payments if you’re unable to pay them at any point in time.
Keep unused credit cards
Many people make the mistake of closing unused credit cards, thinking it’ll improve their credit scores. On the contrary, keeping these credit cards open, provided you’re not required to pay any annual fees, is a smart idea since closing an account might increase your credit utilization ratio.
If the owed amount doesn’t change, but the number of your accounts does, this may harm your credit scores.
Avoid multiple inquiries
Another common mistake people make is to apply for more credit cards when their credit scores are already weak. While getting another credit card may increase your overall limit, it does lead to a hard inquiry.
Hard inquiries, which happens when a lender reviews your credit report when you apply for a credit card, can have a detrimental impact on your credit score. They stay on your credit report for two years and are removed over time.
Don’t miss your bill payments
One of the main things that lenders look into while reviewing your credit report is your bill payment history. This history is often a good indicator of how likely you are to pay bills in the future.
Approximately 40 percent of adults have missed their debt payments. While missing payments is extremely common, you can improve your credit score by not missing your bill payments and paying them on time. Missing the deadline or not paying the agreed amount can hurt your credit score.
These bills don’t just refer to loan payments or credit card bills, but they also include other bills, such as phone and utility bills. You can ensure you’re not missing these deadlines by setting up reminders and auto payments that facilitate this even if you have the chance to forget.
If you’ve missed payment deadlines in the case, you should aim to repay them as soon as possible.
Remove outdated information and correct any inaccuracies
Many people fail to go through their credit reports; in fact, 72 percent of young people between the ages of 18 to 24 have never checked their credit report. This is surprising because one of the easiest and quickest ways to give your credit score a quick boost is through your credit reports.
By keeping an eye out for any outdated or inaccurate information, you can give your credit score a much-needed boost. If you spot anything that fits these criteria, you can submit a dispute and get it removed or corrected within ten to thirty days.
Avoid consolidating balances onto one credit card
Many people can afford to accumulate their balances on a single credit card if you can save on interest charges. A separate credit card is discouraged because you can potentially max out your credit card, leading to a decrease in your credit score, even if you manage to make payments on time.
If the interest rates sound reasonable, a better idea would be to distribute your credit card debt over multiple low-interest-rate cards. On the other hand, you can pay off any high-interest credit card balances by refinancing your mortgage with a cash-out option or through a debt consolidation loan.
Bargain with your creditors
Contrary to what people believe, creditors understand when you’re facing a financial crunch provided you inform them timely. If you’re likely to miss a payment or default on loan, you should advise your creditor as soon as you face financial problems so you can negotiate a resolution that makes sense to both parties.
Don’t put your creditor in a position where they have to turn over your debt to a collection agency. This causes significant issues in the future because collection agencies are quite persistent where recovery is concerned. Moreover, this adverse action on your credit report can have a long-term effect on your credit score.
Depending on your financial situation, your creditors might be willing to help you out, provided you put in the effort and contact them reasonably. Here’s what they can potentially do:
- Reduce the monthly minimum payment
- Reduce the interest rate
- Extend the loan’s length and skip one or more payments
- Waive off late fees and extra finance charges
- Close the account settle for an amount less than the one you owe
- Let you refinance the low at a reduced interest rate or a longer term to decrease your monthly payments
Good credit scores are vital to your financial health. Hence it’s essential to do whatever you can to keep it as high as possible. By keeping regular track of your credit score, you can avoid a financial crunch when the time comes. By focusing on the different aspects mentioned above, you can start increasing your credit score.
What other ways can you improve your credit score? Let us know in the comments below!
- Pros and Cons of Financing a Business
- 10 Simple Ways to Repair Your Credit
- Quick Tips to Repair Damaged Credit
- Starting a Greeting Card Business
- Best Credit Cards for Every Type of Purchase