You’ve checked your credit score, and you’re disappointed. You thought your score would be much higher than it is!
You don’t have to stay disappointed. Credit scores aren’t set in stone. You have the power to change yours for the better. Find out what can improve your credit score over time.
Paying Bills on Time
When calculating credit scores, credit bureaus will take a close look at your credit payment history. They will check whether you’ve consistently paid your bills in full and on time, or whether you’ve racked up a series of late payments in recent years. If you’ve had a bad habit of paying your bills late, it will damage your credit score.
The best way to rectify this problem is to look at your personal budget to see how you can afford your upcoming bill payments. After that, you should automate the bill payments through your online bank account or mobile banking app. This will allow the payments to go through by the deadlines from this point forward.
Reduce Your Credit Utilization Ratio
Your credit utilization ratio is the percentage of credit that you’ve already used. So, if you’ve used up exactly half of your available credit, your ratio would be 50%.
Credit utilization (sometimes referred to as “amounts owed”) is one of the key factors that credit bureaus use to calculate credit scores. A high credit utilization ratio is considered a bigger borrowing risk, so if you’d like to improve your score, you should try to reduce that ratio as quickly as you can.
How can you reduce your credit utilization ratio?
First, pay down outstanding balances on your revolving credit accounts, like your credit cards and your personal lines of credit. If you’re not exactly sure how to manage this, go to the CreditFresh Blog as soon as you can. It’s an effective resource that has practical tips for making loan repayment plans and managing debt loads. It can give you the tools to reach your goals.
Another way that you can reduce your credit utilization ratio is to increase your credit limits. By increasing your credit limits, you’re giving yourself more available credit, which will change your overall ratio. However, increasing your credit limits and lowering your ratio shouldn’t encourage you to borrow more — that will sabotage the entire purpose of this adjustment.
Keeping Old Credit Accounts Open
Another one of the key factors that credit bureaus use to calculate credit scores is credit history. The longer that you’ve had a credit account open, the more credit history you’ve accumulated. So, if you decide to close your oldest credit account (for example, your very first credit card), you could lose on the experience that you gained. Your reported credit history will appear shorter, which could negatively affect your credit score.
If you can maintain your older credit accounts, you should.
Correcting Credit Report Errors
Do you notice any errors on your credit report? You should contact the credit bureau to have them rectified as soon as possible. The errors could be lowering your score. For instance, you might notice that there’s an account on your credit report that you didn’t open. This could mean that the credit bureau has accidentally added an account of someone with a similar name or Social Security Number. And if that’s not the case, this could mean that you have been a victim of identity theft, and someone has opened a fraudulent account in your name.
Don’t leave errors on the backburner. The moment that you notice them, address them.
You have the power to change your credit score. With a little bit of effort, you can give the score a boost and be proud of the results.