Practical Strategies to Improve your Credit Score
May 17, 2022 (Investorideas.com Newswire) Your credit score is an essential measure of your financial health. Your credit score tells the lenders how efficiently you use your credit and how responsibly you repay the amount. Every lender will check your credit score before approving new lines of credit or extending a loan.
People with excellent credit scores are considered low-risk borrowers. Lenders offer better rates and perks to such borrowers. On the contrary, people with low or poor credit scores are considered high-risk borrowers. Owing to this, only a few lenders offer them credit, and they usually charge higher APRs.
If your credit scores it high, you will have better chances of getting the best interest rates on loans and mortgages.
If you have a low credit score, you can follow some steps to gain some points quickly.
1. Register to vote
Lenders check your name and residential address when assessing your credit file. If you are registered to vote, lenders can verify these details easily. As a result, your credit score will also increase. On the other hand, if you are not on the electoral register, it can delay the address verification process, further harming your credit score.
2. Show your creditworthiness
If you are someone who has no credit history, it might be difficult for the lender to evaluate your creditworthiness. This might have a negative impact on your credit score. You can build a good credit history by borrowing small amounts and repaying them on time. Applying for a credit building card with a low credit limit would be the best option in such a case.
3. Repay on time and stay within your credit limits
Lenders review your credit repayment history for the last 12 months to ascertain whether they can rely on you for regular repayments or not. If you miss out on any repayments, it can negatively impact your credit score. Besides this, if you tend to regularly spend near or over your credit limit, your credit score may go down.
4. Strategise credit repayments
The percentage of your credit card limit you utilise at any given time is your credit utilisation. A low credit utilisation indicates that you rely less on credit and you are good at managing your finances. Thus, the lower your credit utilisation, the higher your credit score.
A good strategy to keep your credit score high is to use less than 30% of your credit limit. Another approach is to keep your balance low. You can do so by paying down the balance before the end of the billing cycle every month.
5. Review your credit report and report any mistakes you find
Anything from mistyped residential address to miscalculated amount outstanding can have a negative impact on your credit score. Thus, you should carefully review your credit report and ensure the information is up-to-date and correct. If you find any mistake or error, notify the lender and get it rectified.
Besides this, fraudsters can gain access to your credit card details and use your card without your knowledge. If you don't recognise any purchase made by your credit card, contact your credit card provider.
6. Get a credit building card
One of the best strategies to improve your credit score is getting a credit building card. Such cards have low spending limits but high-interest rates. However, you should keep in mind that your credit rating will drop when you first get a credit card. If you wisely use your card, your score will improve over time.
One strategy to effectively build a credit score with a credit building card is spending a small amount of credit every month. However, ensure you repay the credit in time to avoid high interest.
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