Ways to Boost Your Credit Score

Your credit score is basically proof of your financial wellness. It indicates how good you are at managing credits and, to a greater extent, your finances in general. The higher your credit score, the more willing creditors and financial institutions are to offer you new loans or lines of credit. A good credit score also offers you interest opportunities and extension benefits on new loans in the event of default. If your credit score is low, you may want to boost your credit score.

If you’d want to improve your credit score and attract low-interest online credit companies, such as Crediteck, there are simple ways to go about it. Here are several steps you can take to boost your credit score, attract new loans, and improve financial health.

1. Review Your Credit History

Before you can try to boost your credit score, it’s important to have a good knowledge and understanding of your credit history. Your credit history shows financial activity like number of loans and the amount you have outstanding. It gives possible creditors insight into you ability to pay back your loans over time.

To review your credit history, you can get a copy of your credit report from the two major consumer credit bureaus: Equifax and TransUnion. There are many sites online that can offer you free credit reports. These sites can also notify you of any changes in your credit score.

Once you receive and review your report, highlight factors affecting your credit score. Some things to look out for include payment history, utilization rate, and age of credit history. Knowing these details will help you make informed decisions about your credit score.

2. Pay Your Bills Early

Most credit companies use the FICO credit score system to determine what lenders get as loans and how much. The highest metric on the FICO system is payment, which takes about 35% of the grading system. This means your credit score is heavily influenced by how early or late you clear debts.

Therefore, you’ll need to avoid late bill payments at all costs to boost your credit score. If you have outstanding debts, you’ll need to clear those up too.

The following are steps you can take to pay your bills early:

Make a list of your expenses
Check your list regularly
Set reminders
Schedule payments
Automate bill payments
Pay your bills when you receive your paycheck

The more responsibly you pay your bills, the higher your credit score, and the higher your chances of getting new credit.

3. Understand Credit Utilization

Another way to boost your credit score is to understand how much credit you’ve utilized. This understanding helps you make informed decisions about your score. Understanding credit utilization can also improve your financial wellness.

Credit utilization is that portion of credit you’re using out of your limited credit at a point in time. It’s measured in percentage and takes 30% in the FICO grading system. So, it’s needed to maintain a good credit score.

Experts recommend keeping it below 30%—ideally, the lower your credit utilization score (CUS), the higher your actual credit score. Ways to reduce your CUS include clearing your debts quickly, requesting higher credit limits, and ensuring the use of credit cards to pay off balances.

4. Consider Debt Consolidation

When you have multiple debts, you can roll them into one loan with a lower interest rate and improved payoff terms. This process is known as debt consolidation. Consolidation is done through bank application. People use this process to clear student loans, credit card debts, and other liabilities. But, consolidating debts doesn’t mean you’ve settled debts. It only suggests you have a better process and structure to repay what you owe.

In debt consolidation, a lender gives you a loan for all of your outstanding debt. You then will just have one loan with this new lender for that total amount. So instead of paying off your car loan, student loans, and any high credit card balances, you will just have to make one monthly payment.

The flexibility of debt consolidation makes one of the many ways to improve your credit scores. Debt consolidation can make it much easier to manage your debt. Although you may see a decline in your score in the short term, it improves over time in the long term.

5. Report Credit Errors

Slips, lapses, oversights, and other human errors are bound to happen in your credit report. That being said, it is important to identify errors and report them.

Generally, it takes credit bureaus 30 days to resolve disputes. Therefore, the process may take a while, but it’s worth it. You should especially report errors if you’re trying to clear a loan and improve your credit score to apply for a larger loan. It’s also reasonable to resolve credit issues and improve your credit score before applying for a mortgage.