When it comes to maintaining strong financial health, one of the most important things any person can do is enhance their credit score. There are a number of ways a person can boost this score in order to gain access to different forms of borrowing, such as auto loans, mortgages, and much more.
A credit score is simple a measure of how likely a person is to repay debt that a lender provides them with. This score is calculated by information gathered by the three primary credit bureaus, and a score is generated on a scale of 300-850, with the higher a person’s credit score being the higher the likelihood that they will repay debt.
Whether you are just starting to build a footprint with credit or you are actively taking steps to boost your creditworthiness, there are a number of tips you can follow that will help:
When you have debt outstanding, the total amount of funds you have access to is known as your total amount of credit. Generally, those with higher credit scores are only using 30% or less of their total available credit when billing statements are released. To slowly start to improve your score, pay down the debt you have outstanding until you reach 30%.
For those who have never taken on debt before and don’t have a credit score, getting access to funds can be a challenge. However, if you sign yourself up as an authorized user on another person’s account, their on-time payments and healthy credit habits will allow your own score to increase without any contribution on your part. This is a great strategy for kids or close family members.
Without a doubt, the best way to increase your credit score over time is to build a healthy credit history by making on time and in full payments on debt. When your minimum payment is due, don’t be afraid to pay off the entire credit card balance if you are able to right then and there.
Once more, for those who don’t have an established credit history, consider starting with a secured credit card that acts as a credit building card of sorts. This type of credit card requires the borrower to pay a cash deposit up front to gain access to their line of credit.
Many apartment complexes and bill companies allow you to report your payments to the credit bureaus to improve your credit score. If you have the option and you have a strong history of on time payments, allow these organizations to send a history of your payments to the credit bureaus.
One of the factors used in determining your overall credit score is the credit mix you have. The credit bureaus look favourable upon borrowers who have a diverse mix of debt that they successfully manage on a monthly basis. For example, credit cards are one form of credit, but personal loans are another. If you have a mortgage, credit card, and line of credit, this would be considered a strong credit mix and could reflect positively on your credit score assuming you’re in good standing with all that debt.
Finally, the credit bureaus aren’t perfect, and mistakes can happen. If there is an error in your credit history or credit report that you are made aware of, dispute the error as soon as possible. By letting an error stay on your report, you are allowing your credit score to be damaged for no good reason. Request to view your own credit report periodically over the years to make sure no fraudulent activity has occurred under your name.
Boosting your credit score is not easy when you don’t know where to start, but it is an imperative task for anybody looking o improve their financial health. Rather than accepting that your score has deteriorated over time, use some of the above tips to bolster your score quickly. Keep in mind, however, that a credit score damaged from a poor credit history could take years to fully repair.