How to Improve Your Credit Score

Imagine a world where everything you ever wanted can only be purchased or acquitted after you are paid your salary. It would be the most unrealistic world! People would have crushed dreams and would be demotivated to achieve their ambitions. That’s why loans and mortgages are essential in our day-to-day growth. With a loan or a mortgage, you can begin to enjoy some of the fine things in life and repay the credit later. But lenders won’t be willing to offer you a loan if you show signs of inability to pay!

The Best Way to Raise Your Credit Score

A credit score measures the extent to which individuals, firms, or organizations are deemed suitable to be accorded financial credit. It is primarily based on the reliability of the borrower to pay. A good credit score can help you access a loan facility fast and with ease. The higher the credit score, the better. So, here are some of the best ways to raise your credit score.

  1. Timely payment of your bills

Your payment history is a factor in the computation of your credit score. If you are always late in paying the bills, it could lower your credit score. Here are a few tips on how to pay your bills on time.

  • Prepare a list of all bills and indicate the date by which they should be paid.
  • Mark on the calendar or place a reminder in a place that you will quickly note. You can as well set a reminder on your phone.
  • Always set aside the amount of money you pay for the bills.
  • If possible, set up automated payment techniques.
  • Ensure you signup for reminders from the utility providers.

If you do this early in the month, it’s possible to note a positive change in your credit score in 30 days.

  1. Maintain a low credit utilization rate

We live in a time when you can make purchases without money but with a credit card. However, you must exercise financial discipline and avoid spending too much on credit just because the money is at your disposal. Remember, if your dream is to buy a house on credit, it won’t be possible when you are already too much into debt. In fact, part of the financial discipline is operating your daily life without a credit card unless it is indispensable.

  1. Join score-boosting programs

If you have a low score, it’s probably because you have not updated all the necessary information. Again, it could also be a result of several other reasons. The programs are modeled around self-reporting and expanded account reporting options, allowing borrowers to boost their thin profile with extra financial data. That may include connecting the programs with your online banking information.

Firms such as Experian offer score-boosting programs for free. Experian has been known to correct data that does not usually reflect on your credit report. Such information may include utility payments and banking history. Besides, it also operates an Experian FICO calculator to help borrowers determine their credit score using all the necessary modalities, hence considered thorough.

  1. Apply for credit when in need of it

One of the ways to boost your credit score is knowing when to take a loan and its use. Anytime you apply for a credit line, a complex inquiry report on your credit is pulled. Such inquiries temporarily lower your credit score. These reports indicate that you are taking too many loans, which may not be attractive to lenders. Therefore, if you are not in dire need of credit, avoid applying for it!

  1. Check and dispute any errors on your credit score reports

Since most credit score reports are free at least once a year for each of the three leading agencies in the United States, make sure you ask for a report to see if there are any errors. If you trace any discrepancies, object with the lender or other relevant players to ensure the mistake is corrected. Key areas to check include whether a creditor reported that you missed the repayment schedule when you actually paid on time. After reporting the discrepancies, the credit bureaus must investigate, act, and respond in 30 days.

  1. Ensure your old bank accounts remain open

Lenders base their scores on the credit history of the borrowers. With your old accounts remaining open, most credit scoring models will reward you for long-standing and mature credit accounts. That will even work better if these accounts show you only had small portions of credit, which you settled on time.

  1. Manage your debt-income ratio

When borrowing, you must consider how much net income you make from all your sources. Borrowing too much than your income can repay means you will fall into a debt trap within a short time. That will ruin your credit score, forcing lenders to decline your request for loans or mortgages.

  1. Apply for a secured credit card

Having a secured credit card can help you build a good and reliable history if you lack a good credit history. That’s because this type of card will require a deposit which will act as a credit line to your borrowing. As such, if anything happens and you cannot repay your loan on time, the insurer can use the deposit money to settle the remaining debt. With that, you are rescued from being listed as a defaulter, which would adversely affect your credit score.

  1. Have a budget

When it comes to financial management, it all begins with a realistic budget. That allows you to develop financial discipline. Hence you will not overspend, leading to more borrowing. Besides, a budget helps you determine what amount of credit you will need to finance the deficit in your spending. With the knowledge of the amount of loan you need, you can efficiently compute your debt-to-income ratio and only buy what you can sustain.

Additionally, a reasonable budget will also lead to savings. Savings are considered essential, especially when borrowing funds to buy a house. That’s because you can use the savings for a down payment which means you will not have to borrow huge and expensive loans. Besides, with a culture of savings, you will hardly sink into debt which is good for your credit score.

How Long Does it Take to Improve Your Credit?

Now that the question of ‘what is the best way to raise your credit score?’ has been sufficiently addressed above, the next question is how long it would take to achieve that goal. In response, a notable and positive change could happen in 30 days, 3 months, or six months. It depends on several factors, the most important being the borrower’s effort. How well you commit to addressing factors leading to poor credit scores determines the time taken. Nevertheless, with commitment and focus and depending on the causes of your poor credit score, the change should be visible in 3 months.

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