In this fast-paced world, financial planning and management are some things to be conscious of. Managing your bills and debts and calculating taxes are important for our financial well-being as it affects every aspect of our lives. Despite planning your finances properly from time to time, you may still find yourself out of money. In such a case, an instant personal loan can be an ideal solution to navigate through your financial difficulties. Additionally, if you can maintain a good financial standing with the loans, it will greatly boost your credit score. This will enable you to get any form of credit on good terms. In this article, we will take you through easy ways to improve your credit score so that you can secure better loan deals.
Ways to Boost Credit Scores
If you are having problems with your lower score, worry not. You have a chance to quickly raise it than someone with a good credit history. Experts say it is easier for a person with a low score to increase it with considerably more points of even 100. The reason is that there’s much upside so any smaller changes will automatically result in greater scores.
Therefore, improving credit shouldn’t be something to worry about. It is a simple task if you follow these tips;
Making timely payments
Payment history is one factor that plays a significant role in your credit score. Lenders see you as either a responsible or irresponsible borrower depending on how you pay your debts. Timely payments show you will handle the loan responsibly. This act of paying the debts and bills on time is one sure way to boost the credit score.
Let’s say you’ve had a number of late bill payments in the past. You can still make everything right by making timely payments right now. Once you do that, wait for corrections to be made to your report, which may take months or years. But in case of incorrect or unfair reports on your profile, you may dispute them with the associated credit bureau for rectification.
Pay the balances on your credit card
The credit limit on your cards is termed credit utilization. It is recommended that you always use no more than 30 percent of your card limit. The smaller the rate, the better. Those people with the highest scores have very low credit utilization rates.
Before the card issuer provides reports to credit bureaus, you need to ensure your balances are low. Credit utilization is usually used when calculating your credit score, so it will be helpful if your balances aren’t high when the computation is being made.
An awesome way to attain this low value is to cut down the balance by paying more throughout the months. You can set reminders when to pay the balances regularly. Also, add the alerts on the card accounts so that you can be notified when the balance reaches a certain amount.
Diversify credit mix
Like its name, credit mix means mixing various credit account types together. It is where an individual has credit cards, mortgages, student loans, payday loans, etc. Maintaining several accounts and having a good payment history will show you understand the basics of credit.
Lenders will also see that you can effortlessly manage multiple debts simultaneously. Generally, diversifying credit cards, and other installments loans you can pay on time is a great trick to improving the score.
Avoid opening new accounts
Credit cards can help and at the same time hurt your score, depending on how you use it. According to FICO, applying for many credit lines within a short period makes you a high credit risk. Besides, many lines of credit normally leads to hard inquiries on your reports which in turn negatively affects your score. Opening multiple accounts may also lower your credit history in its age, and length. Therefore, if you want to boost your credit score, try limiting the number of new accounts.
Check your credit report for errors
It is always good to monitor your credit report regularly which will help you stay updated on the changes happening to your profile. This will help you spot any errors and other fraudulent activities in your report and correct them immediately.
Don’t close the old accounts
The first thing people think of when trying to improve their scores is to cancel any credit card accounts to not be tempted to use them. But, in reality, closing an account may lower the score. What normally happens is that closing the card reduces the available credit limit, which in turn raises the credit utilization ratio. This will automatically increase your credit score, especially if you have balances on other cards.
If you have been paying the balances on time, you better keep it open. These records might help your score by showing how you’ve been managing your debts responsibly. Closing an account is not something to opt for if you are trying to improve your credit score. Old accounts with solid records of promptly paying the bills and a long history will make a huge difference to your credit score.
Consider getting a secured credit card
In cases where the credit history is short, you can opt for a secured credit card, which may help establish credit or boost a bad score. However, this will only be helpful if you use it responsibly. Secured cards come with lenient requirements because they are backed up by collateral, which is a cash deposit.
However, these types of cards normally have an annual fee and higher rates when compared to traditional credit cards. But paying off the balance every month might save you the hassle of interest charges and could help establish a positive record.
Conclusion
Improving your credit score is one of the best ways to secure a loan at better rates and help achieve your financial success. Paying your bills on time, regularly paying your credit card balances, diversifying your credit mix, disputing errors in your reports, etc., are just a few tips to get your credit score in good shape. Excellent credit histories and repayment records will help you easily acquire a pre-approved personal loan.