A credit score is a part of your financial strength and is instrumental in getting you the things you may require in the future. If you don’t have the financial means immediately, it allows you to go ahead with a purchase with the promise that you will reimburse later. Consequently, a good credit score is vital to qualify for necessary loans, such as education or buying a house.
Essentially, your credit score assesses how likely you are to repay loans. A decent score can also let you save money by lowering interest rates or waiving down payments for utilities. For example, mean interest rates on car loans are almost thrice as high for people with credit scores of 300 to 660 as compared to people with scores of 661 to 850. This article discusses a few ways you can use to improve your credit score and boost your financial power.
1. Review Your Credit Reports
Firstly, you need to keep track of your credit reports. Closely reviewing each one will ensure no discrepancies, errors, or signs of identity fraud exist within them. If you find any errors or discrepancies, you can dispute them to fix your credit. Additionally, you can also check if you have any unpaid balances and aim to resolve as many debts as you can. Simple mistakes such as a wrong address or a misspelled last name can also affect your score, and you may be able to improve your score significantly by correcting false or outdated information.
2. Think Before Opening New Accounts
Opening a new account can be both beneficial and detrimental. A new account will increase your credit limit, but it will also lower your credit score by a small amount since the average age of your accounts decreases. If you open several new accounts, this effect can compound and negatively affect your overall credit score.
3. Keep Your Old Accounts Open
If you have any old accounts which have been paid off, consider keeping them open, even if you no longer use them. This is because your credit score is affected by the length of your credit history. By closing an old account, you decrease the average age of your accounts, which lowers your score. You can utilize your old accounts by keeping them active through small recurring purchases or subscriptions. Set up reminders for these payments so you can make them on time.
4. Make Timely Payments
Timely payment of dues is the most significant factor affecting your credit score. Your payment history accounts for 35% of your credit score. As a result, missed payments will significantly reduce your score, so it is vital to be vigilant and make timely payments to sustain a decent record. If you are prone to making late payments, consider setting up an automatic payment system or alerts to remind you of upcoming payments.
5. Buy Tradelines
Another strategy you can use to boost your credit score is buying tradelines. Essentially, purchasing a tradeline entails becoming an authorized user on someone else’s credit card, which has low utilization and the perfect payment history that can improve your credit score. When the monthly credit reports are sent to the credit bureau, the positive credit history is reflected on the authorized user’s report, increasing their credit score. However, this method must be used carefully, as it can be expensive. Before buying a tradeline, do check out your preferred tradeline supply company review to ensure you’re making a solid investment.
Endnote
Finally, you must be patient while trying to improve your credit score. A good credit score requires years of intelligent, conscientious financial behavior. Some strategies might result in quick, minor improvements, but improving your credit score primarily requires consistency, patience, and, of course, making your payments on time.