Credit scores are used by lenders when making decisions about whether or not to grant credit to a prospective borrower. Credit scores are essentially a numerical representation of your credit history.
The better your credit score is, the better chance you have of getting approved for a loan, car loan, mortgage, and even rent. If you want to improve your credit score.
Here are five simple ways to do so.
1. Pay Your Bills on Time
The first step in improving your credit score is making sure that all of your bills are paid on time. This is the single most important thing you can do to improve your credit score.
If you have trouble keeping up with this, there are several solutions to this problem. You can set up automatic bill payments or you can use a bill payment service.
2. Never Leave Any Unpaid Bills On your Credit Report
The second step in improving your credit score is never leaving any unpaid bills on your credit report. This is because unpaid bills will show up on your credit report as “collects” and this will hurt your credit score.
If you cannot pay your bills on time, it’s best to pay them off as soon as possible. Otherwise, they will remain on your credit report for up to two years.
3. Keep Your Credit Card Balances Low
The third step in improving your credit score is to keep your credit card balances low. Ideally, you should keep your card balances under 30% of your available credit limit. If you have too much available credit, then you may find yourself having difficulty paying off your card balances each month.
If you are having trouble keeping up with this, then it’s best to use a balance transfer card. These cards have low introductory interest rates that help you pay off your balance faster and transfer the balance to a new card.
4. Keep Your Debt To Income Ratio Below 30%
The fourth step in improving your credit score is to keep your debt-to-income ratio below 30%. This means that you should be spending no more than 30% of your income on debt payments. If you have too much debt, it can hurt your credit score.
If you find that you are having trouble keeping up with this, then consider refinancing. This will allow you to get lower interest rates on your debt and make it easier to pay off your debt faster.
5. Consolidate Debts If It Helps You
The fifth step in improving your credit score is consolidating debt if it will help you pay off your loans faster. If you consolidate debt and use the money that was originally borrowed to pay off other debts, it can help you pay off your loans faster. If you don’t want to consolidate debt, then making sure that all of your loans are paid off as soon as possible will help you improve your credit score.
6. Use a Credit Monitoring Service to Check for Errors in Your Report Once A Year
The sixth step in improving your credit score is to use a credit monitoring service every year to check for errors in your report. Errors will show up on your credit report if you have an account that was opened fraudulently and/or if there is an error that needs correcting. This can include accounts that were closed in error or accounts that were reported open more than seven years ago. It’s best to check for errors once a year to ensure that all of the errors are corrected and no new errors occur.
7. Don’t Borrow Money from Friends and Family Unless It’s an Emergency
The seventh step in improving your credit score is not borrowing from friends and family unless it’s an emergency. If you borrow money from friends and family, it will hurt your credit score because it shows that you have trouble paying back loans. If you have too much debt, then it’s best to avoid borrowing from friends and family until it gets paid off. Otherwise, it can hurt your credit score for years.
If you manage your money well, it will help improve your credit score. This is because you will have a lower debt-to-income ratio and you will be able to pay your bills on time. Additionally, keeping your credit card balances low will also help improve your credit score.
These are some simple tips that you can use to improve your credit score. By following these steps, you will be able to improve your credit rating and make it easier for you to get approved for future loans.