Are you looking to increase your credit score? Everyone knows that having great credit means getting the best interest rates on credit cards and loans. However, what if you have credit already but you do not have the highest credit score you could have? What do you do?
Maybe you have a very good credit score but your score is not in the 700s. Getting to those higher levels on your credit score means you will pay less on money you borrow, whether that be for everyday items you buy with a credit card, an auto loan or a personal loan from your bank. What steps can you take now to get your credit score to move higher by a few points?
I have put together a list of 5 ways to increase your credit score. This list is not exhaustive. But, there is important information that you can use to take action and increase your credit score. Follow these simple guidelines and watch your credit scores go higher, and your interest rates go lower.
Monitor your credit frequently
One of the best things you can do to increase your credit score is to monitor your credit report. The major credit bureaus are required by law to provide you a free credit report every year. You should take advantage of that and review the information on your profile. Ilf there is anything that is inaccurate or too old, you also have the right to dispute these negative items. On average, 9 out of 10 individuals have at least one mistake with the information on their credit report.
This could affect your score significantly. Having accurate and consistent information will help to increase your credit score. Scrutinize the information on your credit report to ensure everything is accurate and consistent. Even the smallest mistake can have a big impact on your credit score. This will ensure there is continuity in the reports leaving nothing to question, and enabling you to receive a higher score.
Pay your bills and pay early
Paying your bills seems like a simple enough concept. But, sometimes you may make a payment on time, however, the payment may not arrive on time. Sometimes payments get delayed for unforeseen reasons, such as the mail is delayed or there is a processing error. If you send off a payment but it does not get processed properly then your credit score may take a hit because you have a late payment.
Make your payments in a timely enough manner that ensures your payment will be processed properly and timely. And, keep records of when the payment was sent. That way if there is a problem you can refer back to your records and dispute anything that needs to be addressed.
Ask for credit increases
You never want to go beyond 30% of your available credit on a credit card. The credit bureaus view maxing out your credit cards as being negative and will lower your score. Instead, if you want to finance something that may require you to utilize all of your available credit you have with one credit card, simply ask your credit card company to increase your available credit. Assuming you are in good standing with the company there is a good chance they will say yes. This way you are not maxing out your credit.
This will improve your credit profile and likely increase your score versus just the opposite. Just remember that when you finally use that new credit limit to not go beyond 30% of your available credit. If you have a $1,000 credit limit and you want to borrow the full $1,000, stop. Ask your financial institution to increase the available credit to $3,000. you improve your available credit and you improve your credit score.
Do not close credit cards automatically
This may seem counter-intuitive, but if you close a credit card account, this actually lowers your credit score. You would think that by limiting your available credit you have access to your score would increase. But, the opposite is true. However, if you have multiple accounts open at any one time but are not using the cards this does not necessarily decrease your credit score. Again, this seems to be counter-intuitive.
You may want close accounts that you are not using. Just know that if you do close these accounts this will have a temporary effect on your score. It is almost like pulling a band-aid off. You just have to do it quickly and get it over with. If you do close credit accounts just do so well before you want to apply for any kind of new credit.
Use different types of credit and increase your credit score
What if you already have a credit card but would like to make a purchase for an item and do not want to put it on your card? Try using a different kind of credit, such as in-store credit or a signature loan. The reporting bureaus categorize different kinds of credit differently. An in-store credit loan would show up in a different category than a credit card. Because of that, your credit profile is more diverse and so will go higher.
- In-store credit is different than a credit card. Use these instead of maximizing any one credit card you may have.
- Signature loans from a bank are in a different category than credit cards. Get a signature loan instead of maxing out a credit card or using the same type of credit that you have already used once before.
The more diversity you have in your credit report the higher the score you can attain. Try and have at least one type of credit from each different type of category. Here are the various types of credit that a consumer can get:
- Credit cards
- Signature loans
- In-store credit
- Auto loans
- Home loans
Having various kinds of credit from different categories will improve your overall credit score.
Getting over the hump with your credit score is easier than you think. There are simple steps you can take to increase your credit score. You need to be strategic in how you approach your credit. If you make small changes to your credit you will see big changes in your score. Work diligently at this. The higher you get your credit score the lower your interest rate will be. That will help you to save money on the things you purchase.