How to improve your credit score
Everyone wants as healthy a credit score as they can get, but sometimes circumstances can negatively affect our score and getting credit then become extremely difficult because our score gets reduced. So if that ever happens, what can be done to get your score back up into the healthy section?
Well before I give you some tips to help boost your credit score, you need to know that there are no quick fixes. Your credit scoring is a reflection of your credit history and so therefore adjusting it can take time, especially if it was reduced because of unfortunate money management in the past. If your score is low because you have not had much credit in the past, then the length of time it will take to improve can be shortened.
Tip 1 – get a copy of your credit history.
This can be obtained from the likes of Experian who will provide you with a record of your credit history, which is reviewed and monitored by all of your current and future creditors. This will tell you exactly what payments you have made to your creditors over time, whether they were on time, whether any were late (and by how much). The record will tell you what your current credit score is and if it is low, you will be able to tell from your history, if it’s low due to poor money management or a lack of credit history.
Tip 2- Bring your biggest balances down.
Look at all the credit you have and ascertain from the report, which are not necessarily the biggest debts, but the ones that are closest to the limit. For example; if you have two credit cards, one with a $1,000 limit and $900 owed and another with $3,000 limit and $2,000 owed, work on bringing the amount owed on the $1,000 card down first. Of course don’t increase your debt on the $3,000 card as you do it. By doing this, it shows that you are not living on the limit and can actually manage your money.
If you have multiple debts in this situation, start with the smallest first to get them out of the way, and then work your way up to the biggest.
Tip 3 – Always make your payments on time.
The management of your payments makes up around 35% of your score. If you are late or default on payments then this will have the biggest impact on bringing your score down. If you have a low score due to not having a lot of credit, then make sure you never miss payments. The best way to always ensure payments are never missed is to set up automatic payments every month from your bank account – a set and forget approach.
Tip 4 – look to over pay
By paying more than the monthly required payment each month, not only shows that you are looking to reduce your payments quickly, but it also shows you can manage your money.
Tip 5 – Dont close your credit cards.
When you eventually clear the balance on your credit cards, don’t close them. For one you may need to use a credit card in an emergency, but also 15% of your credit score is made up of the length of time you have had an account opened. Even if you are not using the card anymore, the fact you have had the account for a number of years bodes well for your score.
Tip 6 –Don’t apply for more credit
If your score is low because of poor management, then do not apply for more credit. Each time you apply for credit it leaves a footprint on your record. The more times you apply, the more footprints you leave and if you leave too many, it looks like you are credit hungry and this is damaging to your score. Every time you open an account it affects your score by 10%, so if you apply for a new account and it’s not granted, you’ve just undone all your hard work in building up your score again.
Now these tips are not exhaustive but they will go some way to help you begin to improve your score. The biggest thing to remember is to cut back on your spending and increase your paying.