How to Improve Your Credit Score?
From having a hard time landing a job to decreased chances of loan approval, there are quite a few effects of bad credit. However, some companies offer fast-approval loans to people with bad credit scores. But, that doesn’t mean you shouldn’t do anything to improve your credit score. The good news is that there are a lot of proven ways to increase credit scores.
But before discussing the ways to increase credit score, it’s important to know what’s considered a good credit score. Credit scores from 580 to 669 are considered fair, 670 to 739 are considered good, 740 to 799 are considered very good, score above 800 is considered excellent.
Make Frequent Payments
One of the fastest ways to improve credit score is to make frequent payments, also known as micropayments, throughout the month. Making regular payments decreases your credit utilization ratio, which results in an increased credit score. Try to pay your bills once every two weeks.
Get Higher Credit Card Limits
One of the best ways to improve credit score is to request the business credit card company for higher limits. To decrease the credit utilization ratio, you have to restrict credit card usage. If you are having a hard time keeping the ratio below 30%, ask your credit card company to increase the credit card limits. This way, you will stay within the credit card usage limits and prevent a decrease in your credit score.
Note that requests for higher credit limits usually result in a hard credit inquiry, which will decrease your score a bit but is beneficial in the long run.
Make On-Time Payments
Making on-time payments is one of the most influential credit score factors, with a 35% weighing. If you want to improve your credit card score within a few months, you will have to make on-time payments, not once but every single time. Set up reminders or set up autopay through your provider to ensure that you never miss a payment.
Don’t Close Unused Credit Card Accounts
If you plan on closing unused credit card accounts, keep in mind that you will experience a decrease in your credit score. Longer credit history can help you build credit fast. By closing a credit card account, you will lose its limit and history. Therefore, if you have to close credit card accounts, considering shutting down the newer ones.
Try Reducing Your Credit Utilization Ratio
After payment history, the credit utilization ratio is the second most important factor that highly influences your credit score. It makes up 30% of your low credit score. Credit utilization refers to credit you are using at a given time divided by the total amount you have access to.
In order to improve your credit score, you have to keep the credit utilization ratio below 30%. This way, if you have a credit limit of $8,000, you need to make sure not to use more than $2,400 in a month. If you want to build credit fast, try keeping the credit utilization ratio below 20%.
A Final Word
We hope that you now know more about the ways to increase your credit score. A few more ways are to dispute any errors you find in your credit report, avoid taking too much debt and become an authorized credit card user.