Credit Score Improvement in 8 Simple Steps

 

Your credit score is a major indicator of your financial viability. It influences significant life events like acquiring a vehicle loan, a low-interest credit card or securing a mortgage. Having a good credit score increases your chances of getting loans and credit cards and lowers your interest rates, saving you money overall.

You can improve your credit score over time if you start to address the issues affecting it. Check out this guide to learn how to raise your credit score and gain financial freedom.

1.    Be on Time with Your Payments

 Payment record is one of the most critical variables influencing your credit score. A history of on-time payments can boost your score, while a single late payment might significantly lower it. Keep in mind the following when trying to pay your payments on time:

·        Late payments can be reported for seven years. It's critical to pay any past-due invoices as quickly as possible. While late payments stay on your record for seven years, their impact fades with time compared to more recent things.

·        Inform your creditors if you will be unable to pay. If it's your first late payment, or you have a good credit history, they may forgive you. The worst they can say is no, so why not try? You can also ask for a payment plan if paying a bill in full is too difficult.

 

2.    Set up Reminders for Payments

Payments can be automated or set up as reminders. The best option for you relies on your payment frequency. See below for the best method for you:

·        Payment Reminders

If you have an irregular pay plan or other financial issues, setting up payment reminders can help you remain on top of your payments. You can set up phone or email reminders, so you never miss a payment.

·        Autopay

Setting up autopay is a technique never to miss a payment if you get paid frequently and have regular expenses. You can set up autopay so that your bills are paid as soon as your salary arrives, and you know know how much money you have left until your next payday.

·        Micropayments

Micropayments, or paying many times per month, are another option. This strategy works well enough with irregular pay periods because you can pay off debt promptly.

3.    Factor Utility Payments into Your Credit Score

Not Only loans and credit cards often affect your credit score. Rent, mobile phone bills, and utility payments are all factored into your score. Paying on time is an excellent method to improve your credit score.

Experian Boost is a free opt-in program that factors utility and phone costs. By authorizing Experian to access your bank accounts, your utility payments are detected, validated, and added to your credit score.

4.    Open New Credit Accounts Only When Necessary

Your credit mix accounts for 10% of your credit score. Adding new accounts isn't the best way to increase your credit score, and opening new accounts solely to shake things up won't help. In the end, this can hurt your credit score.

·        Too Many Hard Inquiries:

Too many complex queries can raise red flags with lenders, indicating that you have money troubles and need to borrow additional money. Hard inquiries include new credit cards, auto loans, mortgages, or other credit applications. However, hard inquiries only affect your score for the initial 12 months after they are made.

·        Reducing the Age of Your Credit

Remember that your credit history accounts for 15% of your score. The more credit cards or credit lines you open, the younger your credit age. Applying for a new credit account can impact your credit score, which is why you should approach with caution.

·        Spending Temptation

Having a new credit account with a new balance can be tough to resist, leading to increased credit card debt. Opening new credit accounts isn't the best way to enhance your credit score if you don't already have one.

5.    Take Care of All Collection Accounts

Past due payments can be sent to a collection agency after a set time. Debt collectors will contact you to settle the debt. Collection accounts might harm your credit score, so don't disregard them.

Try to contact the original creditor to arrange to pay for the deletion letter. If the creditor accepts the terms, get it in writing to assure compliance. It's important to note that not all creditors will accept this type of agreement.

6.    Dispute Inaccuracies on Your Credit Report

Once you have your credit report, check for any errors that could be affecting your credit score. Ideally, you should do this regularly.

Inaccurate credit report entries include purchases made using your name or misrepresented late payments by your lender. To dispute information on your credit report, you must contact each bureau and the organization that provided the data.

7.    Maintain a Low Credit Usage Rate

Maintaining a low credit use is essential to maintaining a low credit amount. How much of your available credit you're now utilizing relative to the overall credit you have. Keeping balances low and paying off debt is essential to enhance your credit score. Credit utilization is the second most crucial component in your score.

8.    Keep Your Old Credit Cards Active

In addition to increasing your credit age (15 percent of your score), active credit cards increase your available credit, lowering your utilization ratio.

Inactive cards may be closed by some companies. Set up automatic payments on that card to avoid this. For example, you can set up automatic bill payment with an older card, then a balance transfer from your checking account to the card.

Keeping an old card open may not be the best option if it has yearly fees or additional fees. If you want to close a card, assess your utilization ratio with the remaining credit to see where you stand without it.

Bottom Line

Improving your credit score takes time, but following the methods above and forming tiny, regular habits will help you the most in the long run. You'll gain greater financial flexibility and ease when buying a home or automobile by mastering your credit and raising your score.

If you need help deleting negative entries from your credit report, the specialists at Blackwater Credit Repair can help you navigate the process.