One of your most valuable financial assets is a high credit score. In order to decide whether or not to approve you for a loan, credit card, or mortgage, lenders look at your credit score, which is a measure of your creditworthiness.
You may be eligible for reduced interest rates with a high credit score, which might result in savings of thousands of dollars over the duration of a loan.
A low credit score, on the other hand, may make it more difficult to get credit or result in higher interest rates and costs.
Ways to Boost Your Credit Score
Here are five ways to boost your credit score,
- Pay bills on time:
One of the most important factors in determining your credit score is your payment history. Payment history accounts for 35% of your FICO credit score, which is the most widely used credit score model in the United States. This means that paying your bills on time is crucial to maintaining a high credit score. Late payments, collections, and bankruptcies can all have a negative impact on your credit score.
To ensure that you pay your bills on time, it’s a good idea to set up automatic payments for your credit card bills, loans, and other recurring expenses. You can also set up alerts or reminders to help you remember when bills are due. If you do miss a payment, try to get caught up as soon as possible and make sure to continue making on-time payments going forward.
- Lower credit card balances:
Your credit use ratio is a significant component in calculating your credit score. This is the difference between the credit you have available to you and the credit you are now spending. Keep your balances as low as possible because your account balance makes up about 30% of your FICO credit score.
Try to make more than the required minimum payment each month to reduce your credit card balances. Transferring high-interest credit card balances to a card with a reduced interest rate is another option to think about. But make sure to carefully read the terms and conditions to make sure you’re not being charged excessive balance transfer fees or other expenses.
- Dispute errors on credit reports:
Errors in your credit report can harm your credit score. That’s why it’s important to review your credit report regularly and dispute any errors you find. Common errors include incorrect personal information, accounts that don’t belong to you, and incorrect balances or payment histories.
To dispute an error on your credit report, contact the credit reporting agency that issued the report. You’ll need to provide documentation to support your dispute, such as copies of canceled checks or credit card statements. The credit reporting agency will investigate your dispute and either remove the error or notify you that it’s been verified as accurate.
- Limit new credit applications:
Your credit score may suffer as a result of each new credit application you make. This is due to the possibility that additional credit applications would be interpreted as a sign of rising credit risk. A hard inquiry, which can remain on your credit record for up to two years, might also be the consequence of each credit application.
Try to only apply for credit when you truly need it to reduce the negative effects of fresh credit applications on your credit score. You might also make an effort to avoid submitting too many credit applications in a short period of time. To guarantee you’re getting the best deal possible, thoroughly read the terms and conditions before applying for financing.
- Keep old credit accounts open:
The length of your credit history is another factor that’s used to calculate your credit score. This means that the longer you’ve had credit accounts open, the better it is for your credit score. The length of your credit history accounts for 15% of your FICO credit score.
Closing old credit accounts can have a negative impact on your credit score because it shortens your credit history. This is especially true if the account you are closing is one that you have had for a long time.
In addition to keeping old credit accounts open, it’s also important to use credit accounts responsibly. This means using credit cards for small purchases and paying off the balance in full each month. It also means avoiding opening too many new credit accounts at once and only applying for credit when you need it.
You may take action to raise your credit score and keep a solid credit history by paying attention to these five suggestions. The rewards of having a high credit score are well worth the time and work it takes to establish and maintain strong credit.
A good credit score can help you qualify for cheaper interest rates, which can save you thousands of dollars throughout a loan, in addition to making it simpler for you to get credit in the first place.
Therefore take the time to study your credit report, make on-time payments on your bills, and manage your credit wisely. Y