Considering the importance of your credit score in every sphere of your life, you must ensure that your financial reputation is stellar. Begin by asking for your free copy from one of the three credit reporting agencies, Equifax, Experian and TransUnion. Study it carefully and check for the unpaid debts and late payments that could be causing a low score. With this vital information in hand, you can set about repairing it. Although credit reports are an indication of long-term financial behavior, you can use these simple and quick tips to improve your credit.
Keep the Utilization Percentages Low
Most people are under the impression that if they clear the revolving dues on their credit card on time, they should be able to maintain a good credit score. However, many issuing companies report the balances on your credit card each month. As against paying your bills when they’re due, you need to focus on the percentage of the credit limit you use every month. The optimal percentage is 30%, and enquiring entities like to see that you use the minimum of credit possible. A good way to get around this issue is to ask your card issuer if you can make smaller payments from time to time so that they percentage of usage stays at or below 30%.
Managing Multiple Cards
Here are a few quick tips on improving your credit by managing your credit cards.
Check your credit cards for the outstanding balances and pay them off. If the balances remain on your record for a long while, they can bring down your scores.
Don’t close unused cards. Experts advise that you split your purchases among the cards with the lowest interest rates. This move will help you lower your utilization percentage.
Make sure you pay off the balances as soon as you can. The frequency with which you continue to clear your dues helps add points to your credit score. Keep in mind that 35% of your credit worthiness is calculated by taking into account how you honor your financial obligations.
Use a mixture of different credit forms to repair credit. That’s because 10% of your score reflects on the mix of credit you use and how efficiently you manage all of them.
Long standing cards that you use and pay off regularly are a great indication of financial responsibility.
Paid off Debts are Good
Having paid off a loan, don’t be in a hurry to get the record removed from your credit score. Each due that you honor has a positive impact on your score. Unpaid old debts and those that have been passed on to a collection agency are no doubt, black marks. But, these marks are likely to get erased in seven years’ time. Maintain old accounts that you have managed well with regular payments for as long as you can. The good credit history helps you build your credit score.
Make Quick Decisions
Each time you go shopping for a student loan, mortgage for a house or car loan, ask for quotes and estimates within a short span of say, a month and finalize the deal in this time. This is because, when you ask for the quote, the prospective lender is likely to check your credit score. Each time that happens, your score dips a little, and this takes a year to recover. On the other hand, if the enquiries are made within a short time of 30 days, the reporting agencies consider them a single enquiry pertaining to a single purchase. They understand that you’ll be comparing different options before making your final choice.
Respect Due Dates
An important quick tip to improving your credit is to ensure that you always pay off your bills before the due date. Many banks and credit card companies offer reminder services where they send you an email or text message, so you don’t miss a payment. You can also opt to set up an automatic payment system with your bank. The payments you need to make on a regular basis are debited from your account. Aside from loan installments, credit card payments and any other major dues, remember to take care of the smaller obligations as well. For instance, you might owe a nominal amount on say, your library dues or a magazine subscription. But, if it is passed on to a collection agency, you might end up with a black mark.
Watch out for Risk Indicators
Credit card issuers like customers with consistent spending and paying behaviors. This is why; you must be careful about risk indicators like skipping payments or paying less on your balance than you typically do. If you’re making large purchases, or spending on services like a divorce attorney, or a real estate selling agent, these could also be indications of upcoming financial trouble. Before deviating from your normal spending patterns, think about how they’ll look on your credit report.
Pre-plan Large Purchases
Many people make the mistake of postponing payments on their dues when they’re collecting funds for a significant investment, like a house or a car. On the contrary, this is precisely the time when you need to continue with the payments and improve your credit. Prospective loan providers need to see that you’re responsible for clearing your dues when they’re considering giving you a new loan.
Check Your Credit Report for Errors
Since you’re entitled to a free copy of your credit report from each of the three reporting agencies once in 12 months, you can request one copy from a different agency every four months. Scour it carefully for errors that could be bringing your scores down. For instance, a creditor could have neglected to inform the reporting agency of debt you’ve cleared, or there might be information of debt that you haven’t incurred. Very often errors in the actual amounts of dues can cause a major loss in credit points. If you notice errors or the possibility of identity theft, contact the agencies and creditors right away and take steps to rectify the issue to raise your credit scores.
Using these simple and quick tips, you can improve your credit and present a sound financial persona that can help you get better interest rates and jobs, and easier credit.