Author: F. Stephen
An impressive credit score can facilitate many aspects of your financial life. It enhances qualification for reasonable interest rates and lower charges on loans and credit card balances. However, 1 in every 8 Americans has an unfavorable credit score which causes many struggles, including:
- Inability to acquire a loan
- Rental application rejections
- Paying higher monthly bills
- Higher insurance premiums
Fortunately, obtaining an improved credit score is not as difficult as it may seem. Today, we will explore four simple methods which will allow you to build good credit.
1. Reduce Your Credit Utilization
The most straightforward method to reduce your credit utilization is to pay your monthly balances in full. Keeping a high balance on your revolving payment can cause a high credit utilization rate, even if you are up to date with your bills.
Maintaining lower balances on your credit card is vital. Doing so will free up your credit availability, which will eventually boost your credit score.
Another method to reduce your credit utilization is to request a higher credit limit, however, do not increase your expenditure. It is recommended to use less than 30% of your credit limit, this will enable you to consistently maintain a lower utilization ratio.
2. Limit Your Credit Applications
Opening and operating multiple credit accounts can be an excellent method of boosting your credit score and impressive credit history.
Nonetheless, ensure you limit your credit applications. If you request new credit (e.g., a new credit card, a mortgage, etc.), the creditor will conduct a hard inquiry, and if it is conducted often, it can significantly damage your credit score and reduce the likelihood of being accepted for future credit applications.
In addition, opening multiple new accounts will reduce the average age of your accounts, further damaging your credit score. While it is essential to build your credit file, you should be cautious when considering new applications.
3. Never Miss A Payment
Regularly missing payments will have a detrimental effect on your credit score. Payment history is one of the primary bases for determining your score. If you are not keeping up with your current payments, boosting your credit score will become increasingly difficult.
Consistent and responsible payment is the most straightforward method of establishing a solid credit history and enhancing your credit score. If possible, set up automatic payments for the minimum amount due. It will help you to have a record of on-time payments.
4. Bring Your Old Accounts to Current
Avoid late payments if you intend on improving your credit score. If you have overdue accounts, bringing them to current is a simple solution to reduce additional late fees while preventing a continued decline in your score. This method ties together with the approaches outlined above. If all of your accounts are fully paid, your credit utilization will be reduced. With this, you will have an impressive payment history, and be more likely to be accepted if you need to apply for new credit.
Conclusion
Recovering from poor credit history and a low credit score may appear as a significant challenge. Fortunately, there are steps that you can take to build a good credit score. If you meticulously follow all the practices mentioned in this article, you will be on your way to a stronger financial future.