In today’s society, a good credit score is a valuable asset. It can mean the difference between being approved or denied for a loan, credit card or mortgage. It can also affect your ability to rent an apartment, get a job or even set up utilities in your name. If you’re struggling with a low credit score, there’s no reason to despair. Here are seven tips to help you improve it.
1. Pay your bills on time
Payment history accounts for 35% of your credit score, making it the most important factor. Paying your bills on time is essential to improving your score. Late payments have a negative impact and can stay on your credit report for up to seven years. Set up automatic payments or reminders to help ensure you never miss a due date.
2. Keep your balances low
Your credit utilization, or the amount of credit you’re using compared to your credit limit, accounts for 30% of your credit score. Keeping your balances low can help improve this factor. Experts recommend keeping your credit utilization below 30% to maximize your score. If you have high balances, consider paying them down or asking for a credit limit increase to improve your utilization rate.
3. Don’t close old credit accounts
The length of your credit history makes up 15% of your credit score, and closing old credit accounts can lower it. Even if you’re not using a credit card, keeping it open can help improve this factor. Older accounts show lenders you have a longer history of borrowing and paying back loans, which can be seen as a positive factor.
4. Don’t apply for too much new credit
New credit makes up 10% of your credit score. Applying for too much new credit in a short period of time can have a negative impact on your score. Each application results in a hard inquiry on your credit report, which lowers your score slightly. It’s best to only apply for credit when you need it and avoid opening multiple new accounts at once.
5. Check your credit report regularly
Checking your credit report is essential to understanding your credit score. Your credit report includes information on all your credit accounts and payment history. You’re entitled to a free credit report from each of the three major credit bureaus once a year. Review it for errors, incorrect information or signs of fraud. If you find any mistakes, report them to the credit bureau to have them corrected.
6. Consider a credit builder loan or secured credit card
If you’re struggling to get approved for credit, a credit builder loan or secured credit card can help. Both options are designed to help people with poor or no credit build their credit scores. A credit builder loan allows you to borrow a small amount and repay it over time, while a secured credit card requires a deposit upfront. Both options report to the credit bureaus and can help improve your score if used responsibly.
7. Be patient
Improving your credit score takes time. It can take several months or even years to see a significant improvement. The key is to be patient and continue making positive changes. With time, dedication and responsible credit habits, you can improve your credit score and gain access to better loan rates, credit cards and financial opportunities. Enhance your reading and broaden your understanding of the topic with this handpicked external material for you. Get informed with this external publication, discover new perspectives and additional information!
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