Your credit score is a fluid number that changes as information is removed, added, and altered from your credit report. It shows lenders how likely you’ll be able to repay any loan you borrow, and the higher your credit score, the more creditworthy and less risky lenders perceive you.
Good or bad credit isn’t written in stone. It is something you have the power to change positively or negatively. With the rise of credit importance in today’s world, it is more important than ever to understand how credit scores work and how you can improve your credit score to boost your creditworthiness.
Credit scores play a vital role in your financial freedom because they hugely impact your chances of getting the financing you need for everyday living. Assuming you can raise a credit score by 100 points overnight is unrealistic. However, it is something you can achieve after a period of diligent credit habits. This article will discuss incredible ways you can increase your credit score.
Understanding Your Credit Score
Your credit score is more than a mere three-digit number. It represents the likelihood that you’ll repay a loan borrowed based on your history with credit card accounts. A bad credit score will make you pay more for everything, while a good score will help you pay less.
Your credit score is calculated based on the information on your credit history, which includes your credit utilization ratio, age of credit accounts, payment history, number of credit accounts, and credit inquiries.
Know Your Credit Score Range
Knowing which class your credit score falls under is important to understand whether your credit score needs some work. According to the VantageScore and FICO scoring scales, your credit score can range from 300 to 850.
Although VantageScore and FICO have different ways of grouping their credit score ranges, it is generally agreed that a credit score between 300 and 600 is considered poor or low. However, a credit score between 670 and 850 is considered healthy.
Thus, if you have a credit score of 715, be assured that you’ll be able to perform basic financial transactions that require credit. However, a 643 credit score will hinder your chances of getting a loan or even negotiating better loan terms.
Incredible Ways To Improve Your Credit
The essence of having a healthy credit score becomes clearer when you’re in dire need of it. When you realize the importance of a good credit score, it might be too late.
At this stage, you might wonder, “how to raise your credit score by 200 points” or how long does it take to raise your credit score.” The answers to these questions lie in the initial steps you’ll take to improve your credit and how bad your credit is.
Below are some strategies you can follow to improve your credit score and boost your creditworthiness.
Limit Your Credit Enquiry
When you apply for a new credit card or loan, the issuing company or lender will assess your credit report while reviewing your application. This type of inquiry is termed “hard inquiry,” and too much of it can damage your credit score. The only way to limit the amount of inquiry made on your credit is to limit the number of new lines of credit you apply for.
Too many hard inquiries on your credit report can indicate that you borrow too much or have too many accounts. This perception can work against you when trying to make an important financial decision. Thus, apply for new lines of credit only when it is necessary.
Don’t Close Your Old Credit Accounts
The age of your credit card accounts is one factor that determines your credit score. You might be tempted to close your old accounts when their use runs out or when your income increases. However, doing this might damage your credit score.
Generally, having a longer credit means you’re guaranteed a higher credit score. You risk lowering your accounts’ average age by closing up your old credit card accounts. Closing your old accounts might also show the lenders that you are incapable of handling the credit card account, which will not work in your favor.
Also, keep your old accounts active. Your credit card issuer might decide to close the account if it’s left unused for a long time. You can keep your old account active by using it to pay recurring charges like your utility bills.
Acquire a Secure Credit Card
A secured credit card is a special type of credit card that requires you to pay a cash deposit (equal to your credit limit) when you open the account. You might ask yourself, “how much will a secured credit card raise my score.” Calculating how much a secured credit card can raise your score is difficult. However, if the card is managed properly, you might see a 200-point increase in your credit score over a year.
The deposit you made when you opened the account will act as collateral every time you make a purchase. So if you fall behind on your payments, your lender can use the deposit to make the payment and clear your debt. Having a secured credit card will keep you up to date on your payments and, in turn, boost your credit score.
Lower Your Credit Utilization
Your credit utilization ratio helps to assess how much of your available credit you’re currently using. Your credit utilization ratio should be 30% or lower to maintain a high credit score. To achieve this, you must either request a credit limit increase from your credit card issuer or limit your spending habits.
Your credit utilization ratio accounts for 30% of your credit score calculations, and you can only score high when your credit utilization ratio is low. Aim for a credit utilization ratio of 10% or lower if you’re serious about improving your credit score.
Some credit card users believe that withdrawing large amounts of cash and paying them back is a good way to boost credit scores. Unfortunately, it is not. For example, just because you have a credit limit of $50,000 monthly doesn’t mean you have to spend almost all the available money each month.
Try Credit Repair Software
One incredible way to improve or boost your credit score is to repair it. And one tool you can use I’m repairing your credit is credit repair software. Although you can repair your credit yourself(DIY) or use professional credit repair services, credit repair software gives you a combined hybrid experience.
Credit repair software has been in the credit repair industry for a while now, and CreditUp Club has one of the best credit repair software for professionals and beginners. Whether you’re a beginner or an expert at using credit, this software will guide you in repairing your credit.
CreditUp Club’s software combines the experience of free DIY credit repair plus the services and experts of professional credit repair to give you a unique user experience.
Get Multiple Credit Card Accounts
Having multiple credit card accounts is a smart way to increase your credit score. Having more than one credit card account means using one as a backup card. You can also decide to use a card based on its unique benefits.
Allocating a card to your different expenses helps you keep your credit utilization ratio to a minimum without affecting the monthly amount you can use. However, be more mindful of your payments and how you spend money. It can become a bad habit and derail your credit score if not controlled. Also, try not to apply for too many cards within a short period. You can do your research and get a card that fits your spending habits.
Don’t Default on Your Bill Payments
Paying your bills is the most important way to improve your credit score. This is because your payment history constitutes about 35% of your credit score calculations. A history of on-time bills or credit payments can help you attain excellent credit scores.
To achieve excellent credit scores, you must ensure that your payments are not more than 29 days late. If your payments are 30 days late, your lender could report you to any credit bureaus, which might hurt your credit score.
If you’re the type that forgets to make payments, you can set up automatic bill payments to help you remember. You can also make email and calendar reminders to notify you when the payment due date is near.
Summary
You shouldn’t feel discouraged if you have a bad or low credit score. The good news is that you can improve your credit in months as long as you maintain healthy credit habits. You can check out the ways listed in this article if you’re wondering how to get an 800 credit score. They will help you build an impressive credit score that appeals to lenders and other financial bodies.
Remember to monitor your credit report to ensure all the information remains accurate. If you notice any errors, contact three credit reporting agencies to dispute the errors.
Visit CreditUp Club if you need to get your dispute letters. At CreditUp Club, we process your dispute letters in minutes. Please take a tour of our website today.
