Do you find it difficult to apply for additional credit because of low credit scores? This is the time for you to begin repairing your credit score. Taking a look at the following habits of people with excellent credit record is an easy way on how to improve credit score. This way, you can open the door for loans with the most interesting rates, as the creditors will give more trust upon you. If you want to apply for a loan, make sure to get your credit report first. This way, you know your score and take necessary steps to improve it.
4 Tips on How to Improve Your Credit Score
Improve Your Bill Payment History
This is one of the most essential step on how to improve credit score. Make sure to your bills on time. Even a single late payment can run your creditworthiness value. FICO – notable credit reviewer – found that people with excellent credit score (800 or higher) had no late payments. To avoid late payment, you can register for automatic payment system from your bank account. Therefore, you will get the notification before the due date.
Keep Your Utilization Ratio Down
Utilization ratio refers to the percent utilization of the credit available for you. Keeping the utilization ratio down can improve your credit score. Finance experts recommend using no more than 10% of the credit available. Low utilization score shows the lenders your ability to manage your credit in a responsible way.
If something requires you to increase utilization ratio, you can pay the credit card balances several times a month. Alternatively, you can ask the lenders to increase your credit limit after using the credit card several times and showing that you can manage it responsible. Logically, 10% of $100 is more than 30% of $30. In other words, by increasing your credit limit, you can keep the utilization ratio down.
Maintain Length of the Credit History
Using your credit cards for several years may improve your credit score. FICO also found that people with excellent credit score had used the credit cards for at least 9 years. However, you still have a chance to get excellent credit history even though you have been just approved for a credit card. Get back to the first two tips: make sure to keep the balance and utilization ratio down and pay the bills on time.
Give It Time Before Applying for the Next Credit
Applying for several credits in a short period of time may show the lenders that you are a high-risk customer. If you need to apply for another credit card, make sure to wait for at least six months. Alternatively, you can apply for a different loan. For instance, if you just applied for a credit card and need additional fund, you can apply for a mortgage or student loan.
An additional tip on how to improve credit score is by choosing a credit that rewards your spending patterns. Keep an eye on the credit scheme and make sure it is in line with your financial condition. This way, you can pay the bills on time.