6 Steps to Improving Your Credit Score

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When you request a loan or credit, a lender will have to look for your credit score at a glance. Therefore, how your credit score determines your financial health greatly.

Your credit score determines your credit trustworthiness. This is determined by analyzing your credit history and credit report. It will be only accessible for lenders to approve your loan request if your credit report is positive and convincing. However, if you suspect that you have a bad credit score, things are discussed in this article to move from one category to the other. Doing so can save you lots of money on an auto loan and improve your insurance premiums. 

What is a credit score?

A credit score is a summary of numerical figures bearing your credit history. It is what lenders use to determine your chances of repaying fully a loan they had made to you. Generally, credit scores range from poor to excellent, with poor rated 300 and perfect ranked 850. Having a higher credit score means that your credit history is good and features long credit history, timely payments, and low credit utilization. Lower and poor scores illustrate that you pose a risk as an investment, maybe because of extended use of credit or late payments. While there is no exact red line for poor or excellent scores, most lenders usually value 720 and above scores and despise 630 and below scores. You can be viewed as an ideal or problematic creditor, depending on your score. As an intelligent consumer, you need to be aware of ways to increase your credit score.

The FICO credit score is the primary determinant of your credit score and is used by many lenders. It determines how much loan you can be offered and the respective interest rates to be charged. It uses the following components to equate your credit score:

  • Payment history – it’s scored 35%. It looks at on-time payments, paying the balance in full.
  • Amounts owed – it’s scored 30%. Using 30% of the allowed credit or fewer warrants a positive rating.
  • Length of credit history – it’s scored 15%. Owning an account for long wins the trust of lenders.
  • Credit mix – it’s scored 10%. When equating your credit score, a combination of auto loans, credit cards, and mortgages may make FICO improve your score. 
  • New credit – it’s 10% of the score. Having a new account is good. Just don’t borrow several versions, as this will reflect on your score and reduce it. 

As it is commonly said, “time will tell,” so does your credit score. As time goes by, it fluctuates and is determined by repaying debts on time and installment loans. Your frequency of using a credit card, maybe by taking a student loan or mortgage, reflects your responsibility of handling more debt.

How to improve your credit score

Improving your credit score starts by knowing your credit score. Fortunately, you can find your credit score in many places that offer free credit scores, credit utilization ratio, and free credit reports. One of them is the Discover Card which is similar to FICO. Other similar available credit platforms include Chase and Capital One, which shows you a Vantage Score. The information reflected on your vantage score and credit score is obtained from the three major credit reporting bureaus – Equifax, TransUnion, or Experian. You can also try free platforms like Credit Sesame. Once you have your credit, it may come with little surprise that it is lower than expected. However, you can use the following tips to move from bad credit history to a better one with a good credit score. 

1. Develop your credit file.

Developing and building your credit file is an essential step, and you can do so by opening new accounts. A report will be sent to major credit bureaus, major lenders, and credit issuers which will help you start laying down a good foundation as a borrower. Signing up for Experian Boost also adds a positive utility to your credit file.

2. Don’t postpone payments.

Lenders usually look at your payment history as it is an excellent determinant of your credit score. Avoid missed payments by making payments on time which will lead to a credit score increase. It will help if you don’t allow your income to extend by more than 29 days. Delaying your payments past 30 days can harm your credit score, and the report can be sent to the credit bureaus. 

3. Review your credit report.

You can request your credit score from the three agencies. Every account holder is entitled to one free credit report annually. Closely review Fix any credit issue you notice by disputing errors available. If there is any outdated or wrong information on the report, notify credit reporting agencies. This will improve your credit score once the incorrect information is fixed. 

4. Create payment reminders.

It will be best if you can jot down payment deadlines for each bill in a calendar. You can also set up online reminders. Consistent on-time payments of every account can increase your credit score within a short time.

5. Clear out balances.

Your credit utilization rate shows how to use your available credit balance. The amount you owe against your credit limit gives the measure of credit utilization rate. Getting a credit limit increase can improve your credit score. However, it would be best if you were very careful before asking for it. 

6. Get credit monitors to track your progress.

You can track how your credit score changes with time by registering with any credit monitoring service provider. Most of these agencies offer free services, and they include TransUnion, Equifax, and Experian. These agencies also come with the added advantage of preventing fraud and identity theft.

Conclusion

Having a good credit score can save you lots of money, especially with an auto loan. Lenders determine your credit trustworthiness by looking at your credit history and credit score. In addition, setting up payment reminders and building your credit file can improve your credit score. 

Rose Rosie is a writer for the personal finance website, Joy Wallet, which provides readers with useful information, resources, and tools to help maximize their financial fitness.

About Author

LaDonna Dennis

LaDonna Dennis is the founder and creator of Mom Blog Society. She wears many hats. She is a Homemaker*Blogger*Crafter*Reader*Pinner*Friend*Animal Lover* Former writer of Frost Illustrated and, Cancer...SURVIVOR! LaDonna is happily married to the love of her life, the mother of 3 grown children and "Grams" to 3 grandchildren. She adores animals and has four furbabies: Makia ( a German Shepherd, whose mission in life is to be her attached to her hip) and Hachie, (an OCD Alaskan Malamute, and Akia (An Alaskan Malamute) who is just sweet as can be. And Sassy, a four-month-old German Shepherd who has quickly stolen her heart and become the most precious fur baby of all times. Aside from the humans in her life, LaDonna's fur babies are her world.

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Jess
Jess
5 months ago

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Alexander Graf
5 months ago

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5 months ago

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Kara
Kara
5 months ago

In this situation, I was always trying to check all the major solutions and ways to count how much I earn, what are the best solutions and how to make it rather effective.

Lanetta
Lanetta
5 months ago

I was checking different methods in order to make money on internet and used credit card bin checker which is a special service, that allows to check all the important information about banking and decent options in order how to calculate your income, what are the most effective ways for trading, different financial news and cryptocurrency events. It allows you to identify the bank and to make the operations with credit cards easier.

Sedvetei Jons
Sedvetei Jons
4 months ago

The growth of a company depends on the successful decisions taken at the right time, which in turn ensures maximum utilization of resources and also ensures maximum output. Establishing a business requires a lot of hard work and a series of complex and lengthy procedures. Another important component for starting a business is proper financial support. 
In this article, we’ll be discussing the essential steps you need to follow to opt for a small business loan.

Lenis Hvin
Lenis Hvin
4 months ago

When one is pre-affirmed, there is a decent chance of getting car loans for people with bad credit and no down payment insight. Knowing the financial plan before going out to a supplier can save one a lot of time as it eliminates the mystery of the cycle. Many individuals are denied basically because they set their spending plan excessively high.
The credit can be distressing if one is using more than 30% of the credit available on the visas and credit extension. Establishing the balances can give one the credit help one needs to assert the self without an upfront payment. This can allow one to purchase more than the credit allows. This is generally not a possibility for individuals, but one can usually get confirmation without a guarantor by adhering to the spending plan.

Morison
Morison
4 months ago

I don’t know how to improve your credit rating, but if you have problems with debt, then you cannot pay them back. Recently I had the same problem, I could not repay the loan and they wanted to take my house from me. It’s good that Credit Associates advised me. These guys helped me and will help you if needed.

Wibler
Wibler
3 months ago

I have a small online store, and although I usually don’t have so many transactions and I almost don’t make large business transfers, nevertheless, it is important for me that my business is safe, so I use the financial services https://genome.eu/bank-account/, where I opened business and merchant accounts. I also have a partner with whom we work together, and now I have the opportunity to give him secure shared access to our account.

Olivia
Olivia
3 months ago

Here is a great video review on this topic that can help others improve their credit score and opportunities. In fact, I know how it is now for many it is problematic

Milky Floor
Milky Floor
1 month ago

Oh, it’s really useful, thanks a lot! I’m thinking about improving my credit score since it plays a huge role in the approval of a merchant account, and I need to set it up if I’m willing to become a business owner and don’t have problems with all the transactions. So I’m pretty sure that your article will help me with that.

Harrah
Harrah
1 month ago

I never knew how credit scores worked and how they go up or down, my school system def dropped the ball on that. But I did do some reading to figure out ways to help improve my current credit score, and your tips were super helpful! I read another article with some additional tips that are also beneficial, https://www.ez.insure/landing/2021/05/proven-ways-to-boost-your-credit-score/ and would love to hear if you have tried it and if it worked fast for you?

Samy
10 days ago

I found it very easy to improve the score, you simply need to pay everything on time or before, have no debt, or very small debt, and use very little of your credit allowance, I’ve read about it on this site and it offers many other good tips about money