Credit Score Quest – Your credit score is one of the biggest measures of your financial health. With a single glance at your credit score, lenders are able to understand how responsibly you use your credit. As such, the better your credit score, the easier it is for you to be approved for loans or new lines of credit.
Credit Score Quest: From Zero to Hero in 5 Epic Moves
As a result, many individuals are interested in not only knowing and tracking their credit scores but also actively finding ways to improve them. However, one of the biggest struggles is not knowing where to begin.
That’s why we’ve put together this helpful guide to help you transform and elevate your credit score.
With these five epic moves, you can effectively pull up your credit score and get approved for any credit you desire.
Without further ado, let’s get started!
1) Make Your Payments on Time
By paying your accounts on time, you show lenders that you’re a reliable borrower and are able to handle credit responsibly. Since your payment history is a vital factor that determines your credit score, having a history of on-time payments will help improve it.
For example, imagine you’re dealing with a low credit score and have had to resort to payday loans due to a financial emergency. In such a case, by simply just making these timely loan repayments, you will be able to significantly improve your credit score.
To further help with making timely payments, you could set up automatic payments for the minimum amount due. As long as you ensure you don’t overdraft your bank account, this will help you avoid missed payments.
2) Dispute Credit Report Errors
Having a mistake on one of your credit reports could be pulling down your credit score. In fact, minor mistakes, like a mistyped address, affect your score and are enough for lenders to refuse you credit.
As such, always review your credit report to ensure all your information is accurate and up to date. If you do spot an error, you will need to contact the provider directly and ask them to correct it.
By regularly disputing any errors on your credit report, you will be able to quickly and effectively improve your credit score.
3) Make More than Minimum Payments
Making the minimum payments on your credit cards may seem attractive. However, it may also unexpectedly impact your credit score.
Lenders see paying only the minimum payments as a sign that you’re unable to chip away at your debts. This can then lead to them marking you down.
Furthermore, you would also pay more interest. That’s why you need to always try to clear as much as you can each month so that you improve your credit score.
4) Keep Your Credit Utilisation Low
Your credit utilisation is the percentage of your total credit limit that you actually use. For example, if you have a credit limit of £3,000 and you’ve used £1,500 of that, your credit utilisation will be 50%.
The best way to maintain your credit utilisation is to always pay your credit card balances in full every month. If this is not possible, aim to keep your total outstanding balance at 30% or less of your complete credit limit every month.
Having a lower percentage will be regarded positively by lenders. As such, keeping your credit utilisation low will increase your credit score.
5) Consider Consolidating Your Debts
If you have multiple outstanding debts, it may be in your best interests to take out a debt consolidation loan from a credit union or bank to pay them all off.
Then, you will only have one payment to deal with. As such, if you are able to get a lower interest rate on your loan, you will be able to pay down your debt more quickly. In this way, you will be able to enhance both your credit utilisation ratio and, in turn, your credit score.
Similarly, you could try to consolidate multiple credit card balances by paying them off through a balance transfer card. These cards have a promotional period during which 0% interest is charged on your balance. However, you need to beware of balance transfer fees as they sometimes cost you 3-5% of the amount of your transfer.
To Sum Up
Improving your credit score is a great goal to have, especially if you are interested in applying for a loan to make a major purchase, such as a new car or a home.
However, the process of improving your credit score is not always easy. At times, it may take multiple weeks or even months to see a noticeable change in your score since you’ve started taking steps to improve it.
Yet, the sooner you begin to actively work on improving your credit, the sooner you will see the results and the closer you will be to achieving all your financial goals.