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Your credit score can hold you back. Your credit score can play a vital role in your life as it plays a big factor in getting credit to make large purchases like cars, homes, appliances, etc. How you handle your credit is reflected in your credit history. Low credit scores deny you for credit cards, mortgages, personal loans, and more credit. A well-maintained credit score can help you in getting the best rates and most favorable credit.
A credit score ranges from 300 to 850. The goal for any credit holder should be to have a score above 760. The idea behind maintaining a high score is, it tells lenders that you have managed debt well before. The credit score is calculated with data including your payment history, credit left, and the length of your credit history.
If you have a low credit score, you are probably unable to make a lot of purchases and will need to get better scores. While the process of improving your credit score will take time, you can follow below steps to maintain your score:
5 Ways to Improve Your Credit Score
Step 1: Pay your bills on time
Paying your bills on time is an important factor in improving your credit score. Late payments can decrease your credit score. 35% of your credit score is calculated on the basis of your credit history. On-time payment gives a positive review of your credit score. The long history of paying bills on time, the better the credit score. Any late payment will remain up to 5 years in your credit history report. So it’s always better to pay bills on time.
Step 2: Review your credit risks/scams
Always keep up to date regarding your credit risks. You can review your credit report once a year for free from any credit reporting agencies: Equifax, TransUnion, and Experian. You will still have to pay to check your credit score. Identity theft can be an issue and if you find any accounts that don’t belong to you, you will have to place a fraud alert and close the accounts immediately. You can also file a complaint with the FTC (Federal Trade Commission) and a police report.
Step 3: Get a credit card when you need
Don’t request a credit card unless you seriously need it. Having multiple credit cards that you don’t need won’t improve your credit score. If you have a credit card, it’s better to make little purchases every month and pay them off. Overdue credit cards and too many inquiries in a short time is bad for your credit score and you will struggle to keep your scores up.
Only apply for credit when you need it. Analyze your requirements.
Step 4: Own your credit profile
Keeping your credit profile active can help you improve your credit score. Active status shows you are committed to your credit. While taking a handful of credit cards or loans is not what we are suggesting, it will probably harm your score but taking ownership of your profile can help you maintain your account.
Step 5: Understand your credit score
Ask yourself questions, do you pay your bills on time? It is very crucial to understand how your credit score works. What is your outstanding debt? The amount you owe should not be close to your credit limit otherwise it might negatively affect your credit score. Check on your credit history often and try not to have a short credit history or too many inquiries or post anything unusual. If you also have applied for multiple accounts in a short period of time, it might affect your credit score. Review how many and what type of credit accounts do you have and be accountable for those accounts. A Mix of credit card cards and installments can improve your credit score.