A good credit score can unlock very important doors that make your life easy and save you thousands of dollars over time. It not only makes it easier to get loans and credit cards, but it is vital if you want a low-interest rate on your loans. But people often think it is very difficult to get and maintain a good credit score and assume it is a time-consuming process.
In this post, I’ll share five easy yet effective ways to improve your credit score!
1. Check your credit report often
Every couple of months, you should check your credit report from each of the three credit bureaus – Equifax, Experian and TransUnion. Look for any inaccuracies in the credit report, and if you find any, dispute them. If you spot these mistakes, you can make sure they are changed and undo any damage to your credit score.
2. Pay all your bills on time
The most important factor affecting your credit score is your payment history; it makes up 35% of your credit score. So it’s crucial to avoid late payments. You can set up monthly reminders or automatic bill payments to ensure you always pay all your bills on time. Even a one-off late payment on your credit report will negatively impact your credit score.
Ideally, you should also pay your credit card balance in full every month. But if you cannot afford to do that, it is imperative that you at least pay the minimum amount due.
3. Don’t overuse your credit cards
The second most important factor – impacting 30% of your credit score – is the credit utilization ratio, which is the ratio of the amount you use on your credit cards divided by your total available credit limit across all cards. Maxing out your credit cards significantly hurts your credit score by increasing your credit utilization ratio. Instead, try to limit your spending to 30% or less of your available credit to improve your credit score. If that’s not possible, you can try to increase the credit limit or apply for a new credit card.
You should also work on paying off the outstanding debt on your cards as quickly as possible to lower your credit utilization rate. For help with this, watch our video 7 easy ways to get out of credit card debt fast.
4. Don’t cancel credit cards when you stop using them
A fairly important factor in calculating your credit score is the length of your credit accounts. So the longer you have had your credit cards for the better. Instead of closing credit card accounts you no longer use, keep them open, but use them very infrequently. An easy way to do this is to use the card to pay for a monthly subscription like a streaming service so that you don’t have to worry about remembering to use it.
5. Don’t apply for multiple credit cards at the same time
When a company is processing your credit card application, they check your credit score, which is known as a hard inquiry. This typically lowers your score temporarily. Multiple hard inquiries close together can lead to a significant dip in your credit score. Even if you are considering multiple credit cards, instead of applying for them all at once, space out your credit card applications over a longer period of time.
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