A high credit score comes with a lot of benefits. It can get you lower interest rates, lower insurance premiums and higher credit limits!
So, how can you bring your score up the ranks? Here are four tips that could help you:
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1. Diversifying Your Credit:
Your credit score is based on a handful of factors: new credit, credit history, payment history, credit utilization and credit mix. Your credit mix is the type of credit that you are using. The more variety that you have, the better.
So, how can you improve your credit mix? Look at which types of credit accounts you have and see whether you can afford to look into something different. For instance, if you don’t have a personal line of credit already, you can go to a website like CreditFresh to apply for one. If you’re approved, you can add this credit account to your mix.
What is a line of credit? It’s an open-end credit tool that offers you a set amount of credit to borrow from. If you’re approved for an account, you can request a withdrawal within your limit and then have it deposited into your bank account. Like a credit card, you will have to repay the borrowed funds later on.
If you already have a line of credit, look into something else! There are plenty of borrowing options out there.
2. Pay on Time:
Late payments will lower your credit score. So, you need to pay your bills on time—every time.
If you miss payments because they slip your mind, you can use online banking features to help you resolve this problem. With online banking, you can set up notifications and reminders so that you know exactly when payments are due. You can also automate bill payments so that the funds get pulled from your bank account on the deadlines. That way, the bills get paid on time, whether you remember them or not.
3. Keep the Balances Low:
Your credit utilization (how much of your credit you’ve used) will affect your credit score. If your balances are always hovering close to the limits, your score might not be very good. This is because you’ve shown that you have a heavy debt load, and you’re not investing enough effort in paying it down. You’re showing that you could be at a higher risk of defaulting on payments or maxing out your accounts.
How can you fix this? Try to keep your credit utilization low. Ideally, your balances should be below the halfway point. This could improve your score over time.
4. Limit Credit Checks:
A common problem happens when people shop for new cars or start house hunting. Potential lenders need to run credit checks on them to see whether they can get approved for loans. Over time, these credit checks take a toll on the applicants’ credit scores.
How can you avoid this? If you’re looking into getting a loan, ask whether the lender will use a soft credit check or a hard credit check. A soft check won’t hurt your credit score. A hard one will.
Try to spread out your loan applications if you can help it. The strategy could improve your credit score—or at the very least, it could stop you from unintentionally lowering it.
These four tips could help you get a higher credit score, along with some of the incredible benefits that come with it.