How to Improve Your Credit Score
Your credit score is the most important factor when it comes to the future of your financial borrowing and having a good credit rating can get you a good deal on basically anything from loans to credit cards. On the contrary, however, if your credit score isn’t that great, the prospects of your future borrowing won’t be great either.
So, if you have a bad credit score, it’s time to start fixing it. And when it comes to improving your credit score, there’s no quick fix or an easy way out. If you adopt any so-called shortcuts, it could backfire and make things worse. It's important to be slow and steady. It’s crucial to work towards building a better credit score over time. If you don’t know where to start, here are a few tips.
Your credit card balances affect your credit rating
One of the biggest things that can mess up your perfectly good credit score is your credit card balance. The balance on your credit card can determine how good or bad your credit score would be.
For a better credit score, your balance should be somewhere around 30 percent or fewer. Just remember, as a rule of thumb, to regularly clear your balances and keep them low in the future. The best strategy to do that would be to make multiple payments in a month.
Don’t get rid of old debt
There’s a common misconception among people that the less credit you have on your credit report, the better your credit rating will be. The result, generally, is as soon as they pay their home loan or car finance, they call the company to get the details of the debt off their credit report.
What you may not know is that doing so may actually damage your credit rating. If you’ve handled your debt well and paid on time, it feeds into your credit score for the better. It shows that you’re financially responsible. It can let the future lenders know they can trust you. An empty credit report, on the other hand, does more harm than good.
Remember to make payments on time
Often times, as we’re searching for shortcuts to improve our credit score, we ignore some obvious steps that are simple solutions for our problems. For instance, the simplest way to ensure you get a good credit rating is to pay your bills on time.
Although it may seem like a no-brainer, you’d be surprised at how often people don’t consider this possibility. Your credit score is a measure of how effectively you can manage your financial affairs. And if you’re bad at making payments, you can be sure that the result would not be good.
Spend less than you do now
You cannot go around trying to improve your credit rating without cutting down on your expenditures. Your ultimate goal should be to reduce the amount of money you owe.
Just because you have a credit card doesn’t mean you can whip it out for every purchase and expect the balance to be magically paid at the end of the month. And what about impulse buys? If you want to have a good credit score, you’d need to spend the most boring financial life you can possibly imagine. That’s the bottom line.