A credit score is a tool to represent the creditworthiness of an individual. It is a numerical expression that is derived from several statistical data of an individual’s credit history and credit files. This tool is not only restricted to banks but is also used by various other organizations which include leading insurance companies and high profile landlords.
The credit score is used to determine interest rates and credit limits.
It also calculates the risk involved in lending money to borrowers and mitigates the loss due to bad debts. The higher the credit score, the higher is the creditability of the person.
Here are ten ways to increase your credit score.
Let’s start off with the first…
Get a new credit card
Maintaining a balance in your credit card is not a determinant of possessing good scores, but holding one or two credit cards can be of immense help in improving a person’s credit score. A secured credit card is a must for an individual where the bank allows you credit which is equal to the deposit one makes.
One should make it a point to prove that they are responsible in handling all types of major credits. One being credit cards and the other one being installments. Taking up a low amount personal loan and repaying it on time improves the credit score tremendously.
Credit Card Payments
Swift and regular payments against credit cards is a must. An individual’s creditability mainly depends on how well he pays off his credit card dues. Reminders should be kept In order to prevent one from forgetting to pay their monthly installments.
Make Mini Payments
It is not mandatory for a person to wait for the deadline to make payments due for their credit cards. One can easily make micro-payments which helps in lowering your credit or debt. Such micro-payments help in improving your credit scored as it lowers the debt utilization ratio.
Make Light Usage of Credit Card
Large balances can hamper the credit score to a large extent irrespective of the fact whether one pays off his dues on time. Limiting the usage to 30% of the credit limit is considered beneficial in maintaining your high credit score.
Keep an eye on the limits
One should keep track on the limit of a credit card. This is one of the largest contributing factors in determining ones credit score. Most of the lending institutions do not provide sufficient information on the limit of the card and take due advantage of this by showing a comparatively lower limit than what a consumer actually possesses which affects the credit score highly. Hence one should make a strict alert on knowing the card limit and accordingly using it.
Get rid of an old credit card
In case, a holder is not using his old credit cards he must get rid of them immediately as the lenders may decide on closing their accounts. This might have an impact on the credit score.
There might be a possibility of overlooking a late payment if the holder is a loyal customer. Hence acquiring goodwill is a necessity in maintaining ones credit score. A high goodwill provides you with the power of getting loans at a comparatively lower rate and other benefits.
Old Disputes should be ignored
Old disputes involving small collection should be overlooked. This allows the collection agency to ignore the disputes when the credit bureau starts investigating.
Remove significant errors
Certain errors which involve late payments and charges should be corrected and credit limits should be reported truly. The negative statements which are more than 7 years old should be automatically removed.
So the above were the steps which one should ideally follow in order to improve one’s credit score. A high credit score allows a person to get more loans and in today’s world loans are a must.
All the best! Got questions? Let me know in comments.