A good credit score does not only benefit in terms of receiving a loan rather it can also benefit in terms of saving money on services, rent or a mobile phone scheme.
The calculation of credit score is done by taking mixed data into consideration such as your payment history, the credit you posses and the time frame of the credit history.
The process of improving your credit score takes time and effort, that bad score does not have to stay bad forever.
Here we will be discussing about seven simple steps for improving your credit score, they are as follows:
1. Are Your Credit Reports Authentic?
The first and foremost step in improving your credit score is keeping your credit reports authentic. There are three credit reports from credit bureaus: TransUnion, Experian and Equifax. Mostly they have errors.
As discussed above, the credit score is based on the credit report’s data thus it’s extremely important that the information on our credit reports are authentic too. Any error or mistake caught on these reports will highly reflect on your credit score.
You can get access of credit reports by any one the three agencies. Under the Fair Credit Reporting Act, every once a year you can receive a free copy of all three credit reports. You can access them with this government-mandated site “AnnualCredirReport.com”.
It is possible to find error in one credit report from one credit bureau while other may not have any mistake. If in case, there is a mistake in all three reports than they will have to be sent to that particular credit bureau from where it came from for rectification.
2. Remind Yourself About the Payment
It is very essential that you make your credit payments on time in order to have a good credit score. Banks often have payment reminders through which they inform their customer when a payment is due through email or text messages.
One can also setup an automatic payment system where the amount for their credit card or loan is directly debited from their bank account, but it does not do full payment and can impact one’s money management system.
3. Have a Longer Credit History
Your long credit history plays an important part in improving your credit score. You can also consider using a friends or family member’s credit card with long history, you can ask them to add you as an authorized user but rarely will anyone will be willing to take up such a responsibility as they are answerable for the kind of purchase you are making and in case of any miss use from your end, their credit history will get damaged. Thus, one must wait, in short if you already possess credit accounts, do not close them and wait for them to gain enough trust.
Usually accounts with nearly five years or up fall in the category of good credit history, but the longer the credit history the better your credit scores will be. For instance, a person with average credit history will have a lesser score, around 600’s than a person with over five years or so.
Initially when one does not have any history, their credit card activity will be checked during three to six months time frame. If you have recently owned a credit card, make small purchases at the beginning to ensure that you can pay them back before the due date to gain the trust of the credit bureaus.
4. Owe Minimum Debts
A far better accomplishment than a good credit score is to owe minimum debts. Don’t be hasty in terms of spending. Put your credit card away for the things you don’t need at that time.
Take help from your credit reports and make a list of all your accounts, see how much you owe to each one of them and what interest rate is applied to them. Have a plan that pays off all your debts with highest interest cards and maintain minimum payments on the other rest.
5. Clear All the Collection Accounts
Rather than transferring your debts to new accounts, pay them off. Instead of constantly getting reports on debts from credit bureaus, contact them and ask if you could do full payment in exchange. It might not be very agreeable by the bureau as it technically violates the collector’s agreement but there is no harm in trying though.
If they agree to it then get it in formal writing before making a payment. If there is any debt that you feel is inaccurate then conflict over it with all three credit bureaus. If the problem is pointed out correctly to the bureaus its removal will spike up your credit score without having to pay for it.
6. Acquire a Credit Card
Get yourself the credit card that you can use responsibly but owning one or two are more than enough. Also make sure you are making your payments within the due date because a new credit card with a bad payment will haunt your credit history.
Although you don’t have to pay your balance in full every month for a good payment history but still make sure to keep your balance low. Keeping balance low will be one of the biggest factors in your FICO score.
Don’t be greedy in applying for a bunch of new credit cards at once, with the thought that you are increasing credit. These applications will cause a hard pull on your credit by the issuer and affect your score adversely.
7. Make a Good Impact
It takes time and effort in order for you to have a good credit score. Make sure you give it ample time.
You are aware that you cannot rebuild the credit score. So build your credit history over time which reflects your credit score. Rebuilding your credit history after a negative change is very difficult.
Adding a negative element such as delinquency or collection accounts leads to even more bad credit scores. They will continue on reflecting your credit scores till they reach a certain age.
In order for you to show positive effects of opening and making on time payments of your credit cards it takes a few months to make the scores rise up.
The steps mentioned above not only teach you a method of receiving good credit grades but they also help you in money management in future. Just focus on having a good credit, if you fail to do so you still have time to improve in order to stop worrying about being approved for loans. Be responsible and keep a good check on your credit reports. This way you will succeed in handling your finances at the maximum