Your credit score can have a major impact on what you can and can’t achieve in your life. In these modern times, your credit score rating can determine whether or not you get a car loan, a mortgage, an apartment, or even a job.
If you’ve got a less than perfect credit score, you don’t have to fret. While rebuilding your credit won’t happen overnight, you can take steps that will help increase your score over time.
Are you wondering what you can do to boost your score so it stops limiting you?
Let’s take a look at eight tips for improving your credit score rating.
1. Reduce Your Credit Utilization Ratio
There are a number of different factors that determine what your credit score is. 30% of your score reflects your credit utilization ratio. This ratio signifies the total amount of credit you have access to and how much of that credit you are using.
Basically, if your total credit limit is $10,000 and you have charged $2000 to your credit cards, you have a 20% credit utilization ratio.
In general, it is recommended to not use more than 30% of your credit card limit. Some experts even suggest keeping your utilization ratio under 10%.
Are you trying to learn more about credit in general? Check out the different types of credit here.
2. Fix Any Credit Report Errors
Occasionally, credit report errors can occur that can hurt your credit score. This means that even if you are doing everything right, you should review your credit report periodically.
If you do find any errors on your credit report, you will need to contact the credit bureau and file a dispute.
3. Request an Increase to Your Credit Limit
It is a good idea to periodically request a credit limit increase. Different credit card companies will have methods for this process, but it is usually a quick and easy thing. In fact, most companies will allow you to request an increase online.
The reason that this can help to improve your credit score rating is that it lowers your utilization rate.
There are a couple of things that you will want to keep in mind when you do this, though. For one, don’t request an increase on a new credit card, as many companies won’t give increased credit limits for new cards.
Secondly, you want to make sure your request does not require a hard inquiry on your credit report. Relatively small increases can typically be approved automatically. If the company asks for more information, declined the request, as they will likely do a hard inquiry which can negatively impact your credit score.
4. Make Your Payments on Time
The most influential factor that determines your credit score is your payment history. This means that it should be your highest priority to make your payments on time.
One of the best ways to ensure that you are never missing payments is by setting up automatic bill payments. This way, the money is withdrawn from your bank account on a specific day every month to ensure that you never have late payments.
5. Be an Authorized User on Someone Else’s Credit Card
Do you have a family member that has a higher credit score and you? If so, they can add you as an authorized user to their credit card. This can help to boost your credit score if they have made on-time payments, have a low credit utilization ratio, and the account history is long.
6. Use “Dormant” Credit Cards Every Once in a While
Over time, as you build your credit history, you will be able to qualify for cards that have better interest rates and better rewards. However, it is not usually a good idea to close your first credit card. Instead, make occasional purchases with that in order to keep it active.
If you completely stop using a credit card, the bank might close the card or reduce the credit limit. If you receive a credit line decrease than your credit utilization ratio will also go down.
It can also hurt your score to close an old credit card account. The only reason you might want to close an old credit card that you no longer you as if it has an annual fee. Even so, though, you might be able to downgrade the card to want without an annual fee without closing the account.
7. Diversify Your Accounts
It can be beneficial to your credit score to have a number of different credit accounts. Of course, you should only borrow money when it is necessary. However, it can demonstrate to lenders that you can manage credit responsibly when you have a variety of credit accounts.
This might mean having a home mortgage, a credit card, and a car loan.
8. Negotiate With Creditors With Whom You Have Outstanding Debts
Paying off debt will help to lower your credit utilization ratio. However, if you have been missing payments than your credit score can be negatively affected. You can often negotiate with credit card companies to have the negative hit removed from your credit report in exchange for paying off your debt in full.
If you go this route, remember to get the agreement in writing.
These Steps Can Help Increase Your Credit Score Rating
Boosting your credit score rating takes time, organization, and commitment. That being said, you can help to increase your number over time in a way that can offer serious benefits to many aspects of your life.
Are you looking for more resources to help you navigate the complicated world of finances? If so, check out the rest of our blog for more informative articles!0