How to Increase your Credit Score

 Your Credit Score is one of the most important measures to check your financial health. It tells lenders at a glance how good you are with money. The higher your score, the easier you will find it to be approved for loans or new lines of credit or maybe even lower rates of interest on your loans. Credit score ranges between 300-900. The closer the score is to 900, the better it is considered.

So if you wish to increase your credit score here are a few steps to start:

• Check your current Credit Reports

 The first thing you might want to do is check your current credit score and what things are working in your favor. You can get a copy of your credit report from free online websites and reviewing them can actually tell you the mistakes you have been making, things that are helping the score, and things that are hampering the score. Some of the helpful things might be Paying the bill on time and having a long history of credit. 

• Paying the bill fully and timely 

This might be the only thing you need to improve your credit score. This is the panacea you have been looking for. Just pay the bills as soon as the bill is generated, don't wait for the due date. Make it a habit to pay the bill on the day it is generated, set reminders, and make sure you enable Auto debit feature on your credit card so that if you ever just forget to pay your bill it automatically gets paid to save you from default. By doing just this simple thing you will see your credit score grow over time.

Don't just pay the minimum amount, pay the entire amount as you will have to pay interest on the remaining amount and after few months without even knowing you will have a pretty huge sum to pay off as credit card interests can be as high as 40 to 70% APR.

• Don't exhaust your credit limit

Researches have shown using your credit limit up to 20 to 30% will help you increase your credit score. Using less credit will increase your credit utilization ratio. For example, if you give $10 to your colleague and $1000 to another, both promises to return the money by the end of the month, and both of them return the money too. But the first person who borrowed only $10 gave to less trouble thinking about the money you lent because even if you can't get the $10 back it wouldn't affect you much as compared to the $1000. The same goes for banks and credit card companies, the less you use the credit proves that you have control over money and you are not totally dependent on your credit.

Do not exceed your credit limit. This will surely take away some points from your credit score. Stay within the credit limit and try to minimize your spending on credit card to 20 to 30 % of your credit limit.

• Limit new credits

You might have to limit yourself from applying for new credit cards and new loans. This will decrease the average age of your accounts and each application can lead to a Hard Inquiry, which may hurt your credit score a little bit. But these compounds over time and could leave a bigger dent.

 

• Keep the old accounts open

The older your average credit age, the more favorably you appear to lenders. If you have old credit accounts you’re not using, don’t close them down. While the credit history for those accounts would remain on your credit report, closing credit cards while you have a balance on other cards would lower your available credit and increase your credit utilization ratio. That could knock a few points off your score.

And last but not the least 

• Catch up on Past-Due accounts

If you have due payments first clear them as soon as possible as you will be paying huge amounts of interest on them. Sometimes you have to pay even 3 to 4 times the amount you borrowed. If you have a number of outstanding debts, it could be to your advantage to take out a debt consolidation loan from a bank or credit union and pay them all off. Then you'll just have one payment to deal with and, if you're able to get a lower interest rate on the loan, you'll be in a position to pay down your debt faster.

The Bottom Line

Improving your credit score is a good goal to have, especially if you’re planning to apply for a loan to make a major purchase, such as a new car or home, or try to qualify for one of the best rewards cards available. It can take several weeks, and sometimes several months, to see a noticeable impact on your score once you start taking steps to turn it around.

These are the steps I followed and was able to generate a credit score over 800 at age of 20. So I hope this will help you too in your financial journey.

For more information you could reach out at:

namangazta@gmailcom