Your credit score significantly impacts important decisions like borrowing money, getting a mortgage, and renting an apartment.
If you are tired of being unable to get credit and want to improve your credit score, you’re in luck.
In this post, the team at Debtbot discusses the different ways to improve your credit score.
Debtbot is your expert on debt relief and credit scores, helping you find the best way to beat debt.
Adopting the tips below can dramatically boost your credit score in as little as 60 days.
1. Fix errors on your credit report
To ensure there are no mistakes, you should check your credit report regularly.
Typical mistakes include:
- Incorrect personal information.
- Misspellings of your name or address.
- Accounts that do not belong to you.
- Unfamiliar accounts or credit inquiries.
- Payments made on time but recorded as late.
- Inaccurate credit limits.
- Accounts passed to debt collection agencies.
- Closed accounts reported as open.
Notify the credit bureaus immediately and give proof to back up your dispute. Remember that checking your credit report will not lower your credit score.
2. Pay your bills early
Your payment history is the most critical factor in determining your credit score, accounting for 35% of your total score calculation.
Simply paying your bills on time can have a major impact on your score. Plus, you save money, especially if you have high interest rates on loans or credit card debt.
3. Pay twice a month
Consider making smaller payments to your credit accounts every two weeks instead of paying all your bills at the end of the month.
This will help reduce your balances faster and improve your credit utilization ratio, which will positively impact your credit score.
For example, paying your credit card balance twice a month at a slightly higher rate can help you pay down your debt faster and save you money on interest and charges.
4. Use a secured credit card
A secured credit card is a credit card backed by a deposit, which acts as collateral.
This card is a safe way for credit card companies to offer credit and can help customers establish, improve, or rebuild their credit.
With a secured card, you must pay a deposit to determine your credit limit, similar to how a bank account works. For example, if you deposit $250, your credit limit will be $250.
Show lenders that you are responsible and help raise your credit score by using the card regularly and making repayments on time.
If you do this, positive information is reported to the credit reporting agencies.
5. Improve your credit utilization
The credit utilization ratio is the percentage of used credit from your available credit balance. This is the second most important factor influencing your credit score.
If you spend $2,000 on a credit card with a $4,000 limit, your credit utilization is 50%.
The aim is to use less than 30% of your available credit.
To raise your overall credit score, use other lines of credit to spread the balance out or increase your credit limit to raise your credit score.
6. Use a mix of credit, old and new
When building credit, using a credit mix will increase your credit score.
For example, having a credit card, loan and mortgage is better than just having a credit card account.
If you don’t have enough credit, you will slow your credit-building efforts, so be sure to get new lines of credit and use them responsibly.
Avoid bad credit products such as payday loans.
Only apply for new credit if you are financially stable. Having too many new accounts can show that you are in financial trouble.
Creditors prioritize the most recent two years of your credit history. So, if you have an older inactive account, use it and pay the balance.
For example, use your credit card to pay for things like Netflix, then pay your credit card off a few days later.
7. Don’t make too many credit applications
When a prospective lender reviews your credit report, a hard inquiry is made, which remains on your credit report for at least one year.
If you have multiple hard inquiries on your credit report within a short time, this may be a red flag for lenders.
However, the good news is that hard inquiries only have a small impact on your credit score.
If you’re shopping around for a car loan, mortgage, or utility provider, your inquiries will usually be treated as one if you make multiple applications within 45 days.
This allows you to compare different lenders and find the best deals.
Soft inquiries for things like employment and insurance will not affect your credit score.
Remember that debt also affects your credit score
Owing debt makes you unattractive to prospective lenders and gives you less chance of getting a loan. Lenders look at your debt-to-income ratio to see if you can afford to repay.
Simply put, a good credit score is worthless if you cannot afford to repay credit.
If you owe money to a creditor, they will pass you to a debt collection agency. An account in collections causes severe damage to your credit score.
Take the 60-day credit score challenge
There are many myths about credit building, but it is actually quite simple. Implementing these strategies today can improve your credit score in just 60 days.