Top 4 Tips on How to Increase your Credit Score
Credit scores are useful for determining your fiscal trustworthiness and is used by many money lending firms for the same purpose. Therefore, it is vital to ensure you have a high credit score to enhance your relationship with such firms and get the cash whenever you need it to meet a particular need. Credit scores are usually accompanied by the most significant factors that affect your score. These factors enable you to analyze your situation and identify the changes that you need to make to improve your credit score. It is important to note that a little patience is required to allow creditors to take note and subsequently report on such changes. There are many steps that you can make towards improving your credit score. Discussed below are some such measures.
1. Maintain low credit card balances and attend to your debts
The credit utilization ratio is an essential factor in computing credit scores. It is a summation of your credit card balances divided by your credit limit. You can get an idea of your credit utilization ratio by reviewing your credit card statements over the past year. By adding the statement balances for every single month and dividing the sum by twelve, you get your average monthly credit expenditure. Having low ratios of up to thirty percent gives a good impression of your credit responsibility. It communicates to lenders that you are capable of effectively managing your credit. Prompt debt payment and ensuring you have low credit card balances help to reduce your credit utilization ratio.
2. Timely payments of bills
Paying your bills on time is one of the most effective ways of using your credit cards to build credit. Creditors usually review credit reports to assess you based on your reliability in terms of paying regular utility bills. This is considered a powerful indicator for determining and predicting your financial behavior in the future. Therefore, paying your bills on time goes a long way in ensuring you get a positive review by showing your commitment to abiding by timelines.
Adverse payment incidences can put a dent on your credit report and hurt your chances of building an impressive credit history. However, it is only fair to note that making timely payments may not always be possible regularly. If you find yourself behind on a given amount, you should bring them forward and pay them as soon as you can.
3. Acquire and use credit accounts sparingly
Having multiple accounts just for the fun of it isn’t a good idea when it comes to improving your credit score. Having many credit cards tempts you to use and overspend on things or activities which you could have avoided otherwise. Also, it creates too many inquiries when it comes to computing your credit score.
4. Retaining unused credit cards
Though this may sound a bit contradictory, maintaining your unused credit accounts is a viable strategy, as long as they do not have your annual paying fees. This is because closing an account can lead to an increase in your credit utilization ratio. Having a small number of open accounts while owing the same amount may lead to low credit scores.
Your credit score is an essential way of gauging and assessing your financial trustworthiness and accountability. Therefore, it is vital to deploy various means to raise your credit score, such as using Credit cards to build credit, among other strategies, as discussed in the article.