Your financial health is crucial for maintaining a stable lifestyle. Not only does it reflect well on your profile, but it is also critical in matters related to your bank and finances. Credit is the deciding factor when you apply for a loan, either for a home mortgage or a loan for your favorite car. Credit scores can affect an individual’s financial health and stability; hence, keeping a constant check on this score can significantly influence purchasing habits. Your credit score will determine whether you qualify for lower interest and insurance rates. Therefore, if you are among those individuals actively seeking ways to increase their credit score, you will find seven ways to do so below.
Monitor your Credit Report
The first and foremost step towards improving your credit score is to monitor it thoroughly. According to research, credit reports tend to have errors that can harm your financial standing, affecting your overall score. The report may likely be inaccurate due to the rise in identity theft and credit card fraud. Make sure to check for these and keep an eye on your credit score often.
Lower your Debt
Another way of raising your credit score is through paying off debt. Even when partial debt is paid off, the credit score increases. Hence, instead of having to move around these obligations, it is recommended that you reduce debt obligations as much as possible. Credit Utilization Ratio measures one’s debt as a percentage of the total credit available. A lower ratio is usually preferred to improve the credit score significantly.
Request a Higher Credit Limit
Alternatively, an increase in a credit limit may be acquired if sufficient cash is not available to settle debt obligations. When the total credit limit is higher, the credit utilization ratio will likely decrease, ceteris paribus. However, an important point to note here is that if you have a poor credit history in the past, this limit increase request may not be entertained. It all depends on how well you manage your shopping and spending habits!
Pay your Bills on Time
Payment history has a substantial impact on your credit score. Prompt payments are the most straightforward approach to achieving a higher credit score. Analogous to bookkeeping, an individual can record all their debits and credits to track balances and arrears at the end of each month. Arrears may be settled once cash becomes available.
Don’t Close off Accounts
Keeping all your new and old bank accounts open can be helpful to maintain a good credit score. Each of your accounts contributes to your credit history, and closing either will effectively lower your credit score. Moreover, if any one of the accounts becomes redundant, it is better to keep it operational instead of having it canceled.
Keep your Balances Low
Make sure to keep lower balances on your credit cards to improve your credit score. Account balances should effectively be below 75 percent of the available credit. This must be ensured for it to reflect well on your credit score. This can be exercised by keeping track of the balance monthly. A little more effort can pay off in the long run.
Improve your Buying Habits
Lastly, a healthy credit score can be maintained if your buying habits are slightly tweaked. Keep your expenditures spread across various months to avoid draining your available credit limit. It is likely to ensure a balanced credit usage between months. Payments can be made as soon as the month ends, improving your credit score each month. A viable balance of payments and credit usage can thus be achieved.
Conclusion
Using these seven easy tips, you can improve your credit score without worrying about subsiding the urge to purchase your favorite items.
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