Improve your credit score easily with these tips
Improving your credit score is one of the most important things you can do, and we’ll provide some easy tips on how you can achieve that goal quickly and without stress. Read on for more!
New to credit? Rebuilding credit? We can help you achieve excellence
At first, figuring out how your credit score works might seem like a daunting task. The many financial factors that contribute to it aren’t always easy to understand.
And it’s much easier to damage than improve your credit score. Due to that fact, learning how to raise your rating can seem confusing.
Nevertheless, there are quite a few easy ways to improve your credit score.
By doing so, you can turn yourself into an appealing borrower for a multitude of different lenders.
How your credit score is calculated
Basically, your credit score depends on the information contained in your credit report. In the U.S., each person has three credit reports to their name.
One from each of the main credit bureaus, which are Equifax, Experian and TransUnion. Each credit report might not be exactly alike.
However, the most widely used credit scoring in the country, FICO®, uses the same method to determine someone’s credit score.That is regardless of whatever credit report.
To improve your credit score, you should know that there are five categories that have a direct impact on it. For instance, new credit lines are responsible for 10%, and it refers to new cards, loans, mortgages, etc.
The length of your credit history is responsible for 15%. That means the longer you’ve had an open line of credit, the better.
Credit mix adds another 10%, which is basically a mixture of revolving credit and installment credit. You should always have a mix of both types.
Your credit utilization counts for 30%. That basically means how much debt you have vs. how much credit is available to your name. The ideal credit utilization should always remain 30% or less.
Finally, your payment history adds the last 35%. And it’s about how often you’re able to make your payments on time.
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How to improve your credit score if you don’t have a credit account
When you’re new to credit, it might feel impossible to get things started. Getting a credit card is the quickest way to start building your score.
However, you need credit to get one. Luckily, there are a couple of things you can do about it.
Get a secured credit card
Applying for a secured credit card is one way to improve your credit score if you don’t have a credit account. A secured credit card is a type of credit card that is backed by a deposit that you make with the issuer.
The deposit acts as collateral for the credit card. So if you default on your payments, the issuer can use your deposit to cover the balance.
Because secured cards require a deposit, they are usually easier to get than traditional credit cards.
And because they report to the major credit bureaus, using a secured card responsibly can help to improve your credit score.
Become an authorized user
If you’re trying to improve your credit score but don’t have any credit accounts in your name, becoming an authorized user is a good option.
An authorized user is someone who is allowed to use another person’s credit account.
As long as the account is in good standing, being an authorized user will help improve your credit score. The key is to find someone who has a good credit history and is willing to add you to their account.
Once you’re an authorized user, make sure to keep the account active by using it regularly and paying the balance in full each month.
Add your recurring bills to your credit report
If you’re working to improve your credit score but don’t have any credit accounts yet, you might be wondering how to get started.
One way to get your credit history started is to have your utility bills, rent, and other regular payments added to your credit report.
This is called “tradeline reporting.” Most landlords and utility companies don’t report to the credit bureaus, but some may be willing to start if you ask.
You can also sign up for a service that will track your payments and report them to the credit bureaus on your behalf.
While tradeline reporting won’t give you a high credit score right away, it’s a good way to start building your credit score.
How to improve your credit score with an established credit history
After you get the ball rolling and gain access to credit accounts, you can follow the steps below to gradually improve your credit score over time.
Pay monthly balances in full
One of the best ways to improve your credit score once you have a credit history is to pay your balances in full each month.
This shows creditors that you’re responsible with your credit and that you’re able to pay back what you owe.
It’s important to keep your balance below 30% of your credit limit, though, as this is one of the factors that makes up your credit score.
Another way to build credit is to make sure you always make your payments on time. This shows creditors that you’re reliable and that they can count on you to repay your debts.
Get a new credit card
If you’re looking to improve your credit score, one of the best things you can do is apply for a new credit card.
This may seem counterintuitive – won’t having more debt hurt your credit score? – but in fact, using credit responsibly is one of the best ways to improve your credit history.
When you apply for a new credit card, the issuer will perform a hard inquiry on your credit report. This will lower your score temporarily.
But if you use the card wisely – by making timely payments and keeping your balances low – you’ll see your score rebound in no time.
Additionally, having a mix of different types of debt is generally favorable to creditors.
So if you’ve been relying solely on loans to build credit, adding a new credit card to the mix can help boost your score even further.
Request a limit increase
One way to build credit is to request a credit limit increase from your credit card company.
If you have been a responsible customer and have made all of your payments on time, most companies will be happy to increase your limit.
This is beneficial for two reasons. First, it will lower your credit utilization ratio. Which is the amount of debt you have compared to your total credit limit.
A lower ratio indicates to lenders that you are a responsible borrower who uses credit wisely.
Second, a higher credit limit can give you some financial wiggle room in case of an emergency. Therefore, requesting a credit limit increase is a simple and effective way to improve your credit score.
The 5 Best Places to Find Your Credit Score Reports
Staying on top of your credit report is one of the best ways you can make sure you’re doing the right thing to improve your credit score.
By following the link below, you’ll learn about the best places you can find these reports. Read on for more!
Looking for the best way to check your credit score reports? Check out our top 5 picks to help you keep track of your credit score.
About the author / Aline Barbosa
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