Boosting credit score takes time. It is not a sprint, but a marathon. If you put in efforts and do the right things, you can build a good credit score over time. Being consistent and proactive go a long way in building good credit.
Here are a few steps that can help you boost your credit score in the correct direction.
1. Pay attention to the balances on your credit cards
Revolving credit is one of the most important factors considered while calculating a credit score. It is important to understand the fact that the balance between how much credit you have and how much you are using is critical. Ideally, you should be using a fraction of total credit available to you. The less credit you use, the better you score is. As a rule of thumb, keep the percentage of available credit used below 30%.
2. Maintain the balances on your credit cards low
The outstanding balance on your credit card plays a crucial role in calculating a credit score. If you have small balances, it reflects good financial habits and hence adds positively toward the credit rating. However, if you have too much outstanding balance, it is a red flag. The best idea is to split your bills among multiple cards. That way, you will avoid having one card used to the brim and the other not used at all.
3. Keep that old debt on your report
Many people want to get rid of the debt they paid off from their credit report. The debt that you handled well and paid off on time is an asset and not a liability. It shows that you honor your commitment and are financially wise. So, if you have a good debt on your report, don’t be in a hurry to get it scrubbed.
4. Manage the timing of your credit requests
Every time you ask for credit, it causes a small dip in your credit score. If you are applying for multiple loans, make sure that you are doing it in a short time. FICO ignores multiple credit inquiries and lumps them into one as long as they happen in the last 30 days. So, you have a roughly 30-day window to apply for multiple loans without it affecting your credit score.
5. Pay your bills on time
Paying your mortgages or car loan installments on time is a big plus toward your credit score. Make sure that you are not delinquent on any payments what so ever. If you fail to make a payment on time, you will be severely penalized by the financial institutions, and you will lose money as well as a few points off of your credit score.
A good credit score is essential for almost anything whether you want to rent an apartment or buy a home. If you are proactive and alert, you can build and maintain a good credit score over time. We hope that these tips will help you get closer to achieving a credit score that you want.