A high credit score will make your life so much easier and play a huge role in all the financial decisions you make. throughout your life. Having a good credit score allows you to get better loans with lower deposits and interests. Building the perfect credit score takes time, but here are some effective tips that you can take to improve your credit score.
Don’t Make New Credit Card Applications
When you apply for a new credit card, the lender will perform “a hard inquiry” that will impact your credit score. The hard inquires you incurred and how many credit accounts you have opened represent around 10% of your credit score. Opening too many credit accounts over a short period of time will decrease your credit score.
Pay Your Bills On Time
You may have heard this dozen of times, but this is by far one of the most important aspects of your credit score. Your payment history represents 35% of your credit score. When lenders review your credit report the first thing they are going to review is your payment history because this is a good predictor of how you will perform in the future and shows that you are responsible when it comes to your credit. This includes all bills like loans, credit card bills, rent, student loans, auto loans, and even phone bills. Set up reminders online or write down payment deadlines so you can always pay on time. Late payments will have a negative impact on your credit score.
Lower Your Credit Utilisation Rate
Your credit utilisation ratio is calculated by adding all of your credit card balances and dividing that amount by your total credit limit. It is the next most important thing after the payment history and represents 30% of your credit score. Lenders prefer low ratios of 30% or less. A low credit utilisation rate shows that you know how to manage your credit. To lower the credit utilisation ratio pay your credit card balances off in full each month and becoming an authorised user of another person’s account (make sure they have good credit).
Check Your Credit Reports
Your credit score is based on the information of your credit report so checking it is important to know more information about your credit score and how you can improve it. It shows your credit and debt management. Tells information about your accounts that have gone to collections, bankruptcies or any repossessions. Although there are hundreds of credit scores there are only three credit reports. Get free copies of the credit reports from the three major credit bureaus every 12 months. Check the credit reports for any inaccuracies or incorrect information that could negatively affect your credit score. The federal law lets you dispute that error, once the credit bureau deletes the error your credit score will improve.
Don’t Close Unused Credit Card Accounts
Unless the credit card accounts are costing you money in annual fees it is best to avoid closing unused credit accounts because it will increase your credit utilisation ration. If you need to close any unused credit accounts close the newer ones because the age of your credit history is important.
