6 Simple Tips to Help You Improve Your Credit Score

Your credit score is a three-digit number that represents your creditworthiness.

It’s used by:

• Lenders

• Credit card companies

• Other financial institutions

To determine whether you’re a risk to lend money to.

A higher score means a better chance of approvals for credit, with lower interest rates.

If you have a low credit score or no credit history, building credit can seem like a daunting task.

But, there are steps you can take to start building credit and improving your score over time.

Use these 6 simple tips to start improving your credit score.

Check Your Credit Report

The first step in improving your credit score is to know where you stand.

You can get a free copy of your credit report from each of the bureaus (Experian, Equifax, and TransUnion) once a year.

Check your report for errors and dispute any inaccuracies.

Errors in your credit report can negatively impact your credit score. It’s important to correct any mistakes.

Knowing your current situation is step 1, so find out your current credit score and know where you stand.

Establish Credit

If you don’t have any credit history, consider applying for a credit card or becoming a user on someone else’s.

A secured credit card requires a security deposit. This serves as collateral in case you can’t pay your bills.

As you use the card and make payments on time, you’ll start building credit history.

Becoming a user on someone else’s can also help you build credit, as long as the account holder pays the bills on time.

It’s imperative to not miss a payment, as you’ll end up defeating the point of using a credit card in the first place.

You risk falling victim to compound interest by getting yourself into high interest debt.

Pay Bills On Time

Payment history is the most important factor in determining your credit score.

It accounts for 35% of your credit score.

Set up automatic payments or reminders to ensure you never miss a payment.

Even one missed payment can negatively impact your score.

Credit cards can lead some people on a downward spiral as they may feel like they have more money than they do.

You’re spending your lender’s money, and then paying it off at the end of each month.

Don’t fall into the trap of overspending, and make sure you know what you’re spending your money on.

Keep Credit Utilisation Low

Your credit utilisation ratio is the amount of credit you’re using, in relation to your limit.

Aim to keep your CUR below 30% to avoid negatively impacting your score.

For example, if your credit limit is $1,000, try to keep your balance below $300.

A high CUR could show lenders that you’re bad with money. It could also show them that you’re in desperate need for credit.

This isn’t a good look, and could put lenders off of lending you money.

Don’t Close Old Accounts

Length of credit history is also a factor, accounting for 15% of your credit score.

Keep old credit accounts open, even if you’re not using them, to show a longer credit history.

Closing old accounts can shorten your credit history and negatively impact your credit score.

Monitor Regularly

Keeping track of your credit score can help you identify areas where you need to improve.

Many credit card companies and credit monitoring services offer free credit score monitoring.

Check your score regularly to ensure it’s accurate. Also, check your score to track progress as you work to improve it.

Like most things in personal finance, pay attention and things will improve.

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