Your credit score is a vital factor when applying for loans or credit cards. It can be an important factor companies consider before handing in a facility or a credit card to you. But did you ever sit and think about what a credit score is?
The score represents the likelihood of you paying your bills on time. It is calculated with information in your credit reports, such as payment history, the debt you have, and your credit history length. The higher the score, the better it demonstrates good credit behaviour in the past -which will make it easy for you to get loans and credit.
In this article, we share 10 tips to help you improve your credit score.
10 Tips to Help Improve your Score
Treat all of your debts as equal
Your credit card debt and your tradeline or installment debt both equally affect your credit score. Which is why you shouldn’t neglect small payments with low interest to prioritize your loans as having balances in your credit cards constantly can hurt your credit score. You should always make it a priority to do all your payments on time and should follow a strict plan to keep away a portion of your salary towards your debt payments.
Maintain a long history with credit cards
Having a credit card with a long history can benefit you in terms of building your credit score as it enables you to have a long credit record and report- which if you maintained well will help you with your score. Having a longer credit history with credit cards will not only help you with getting good credit benefits, but will also assess you as a person in government offices. Maintaining a good score is vital to get new loan facilities from organizations.
Fewer cards the better
People often think having a number of cards and with balances spread out is a smart choice. However, this can easily lead you to overuse them, getting you into bigger trouble. Most often than not, you tend to go all out and spend your money on unwanted things which puts you further down on debt. According to experts, having as fewer number of cards as possible is the best strategy to improve your credit score rather than having multiple cards with balances, because with such strategy you have less credit limit to spend and you would be limited in choices and stop getting tempted by the promos you have been thrown out by different credit card companies.
Pay on time, every time
This is one of the simple things that you can follow to build your credit score. But not everyone keeps all their bills in order and organized and makes the payments on time. Knowing your due dates and keeping track of your bills effectively can help you make your payments without any delays. It is vital to keep track of all your due dates, especially those of your credit cards and loan payments, as if you do not meet them you have a higher chance of getting penalized with a penalty.
Keep your balance on your credit cards as low as possible
It’s never a wise choice to rack up your balance in your credit cards if you are to improve your credit score. People with the best credit scores use only 8% of the credit limit of their cards. So at least aim for 30% or lower when you are using yours.
Avoid applying for new credit whenever possible
Many customers are often bombarded with ads of new credit cards, and in the current context, credit cards are given to customers right now without even proper verification of salary confirmations. By doing this customers have easy access to newer credit cards, because they are easily attainable. .Did you know that applying for new credit hurts your credit score? This is why you should always keep in mind to avoid new credit as much as possible unless it’s absolutely necessary.
Make payments in full when possible, or at least the minimum
Paying your payment in full helps you pay off your debt fast. But if it’s only the minimum payment that you can pay make sure to make the payment always on time as late or missed payment will be on your reports for years. If you lapse these payments you will be charged with late payment penalties or even at times be charged with additional interest on overdue payments. Try to keep away from such penalties as much as possible.
Communicate if you encounter problems
If you are facing a financially rough situation where your ability to pay your credit is affected, make sure to contact your creditor and explore your options for an alternative payment solution.
Always take credit that you can afford
Never use credit because you have more to reach your debt limit. Always consider your monthly income and never exceed 10% of your monthly income for paying for credit or debt.
Start following these 9 tips and build your credit score sooner than you expect it to happen
All in all, if you ever come across bad credit, and you still want to avail a loan, there are many other alternatives you can look into. An alternative as such are payday loan lenders. They are the only choice you can opt into as they hardly check for credit history since they have their own scoring and risk systems.
A company that can help you with such personal loans is OnCredit.lk. Their cash loans are quick, fast and convenient for people to use. You can have your money in your bank in an hour of application.