Your credit score has a significant impact on your financial life. It affects the interest rate you get on loans, your credit card, mortgage, car payments, and insurance premiums. It is in your best interest to keep your credit score as high as possible. If your credit score has dropped a lot, you have to change your financial habits to raise them.
Fixing your credit score takes time, consistency, and financial discipline. However, the effort is worth it. Note that the lower your credit score is, the higher its growth potential. For example, it will be easier for you to gain 100 points from a credit score of 550, than it will be to gain the same amount from 700.
If your credit score is on a steady decline, your priority should be to stop the bleeding. Find out what is dragging your credit score down and rectify it. This can be a high credit balance, loan default, or a missed car payment. This article lays out five ways in which you can increase your credit score and they are:
1. Work with a reliable credit repair company
Credit repair companies analyze your credit report and work to fix your credit score. Different people have unique spending habits and financial circumstances, so they implement bespoke solutions to get the desired result. You can use a credit score boost app if you would rather not work with a company.
2. Pay off credit card debt on time
Strive to always pay off your credit card debt on time. Spend wisely so you do not accumulate debt that you cannot pay off. Ensure you pay off your debt before the end of the month (or the end of the current billing cycle). This will help you avoid accruing interest which makes the debt harder to pay off.
3. Keep your credit utilization ratio low
Credit utilization ratio is the amount of your available credit limit that you currently use, expressed as a percentage. The lower this ratio, the better, as credit bureaus use it to know if you are spending beyond your means. Aim to keep this ratio below 30% at all times.
4. Seek a higher credit limit
This move can lower your credit utilization ratio while your credit card balance remains the same. By reducing your credit utilization ratio, your credit score will gradually go up. You may qualify for a higher credit limit if your current income is higher than it was when you first obtained your credit card. When you get a higher credit limit, keep your spending habits the same and resist the temptation to use the extra credit.
5. Challenge credit report errors
An error on your credit report can reduce your credit score so you should dispute any error you spot instead of suffering the consequences of it. You can request weekly credit reports and scrutinize them to find errors like marking a payment you made on time as late.
Endnote
You should always try to get your credit score to be as high as possible because it will help you get favorable terms when taking loans or making large purchases. If your credit score is low, try applying the tips listed above and stay consistent to gradually increase it. It will take time to get your credit score to where you want it to be so be patient and stick to the plan.
