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How To Improve Your Credit Score?

Tips To Improve Credit Score

The use of a Credit card has become the norm for all types of payment in the essentially digitalized and globalized world of today. A credit card sounds an intriguing and feasible option to pay all your bills without actually having the money in hand.

The credit card is an easy way to buy all the pretty and glamorous stuff which you want to showcase to your friends or colleagues.  It is an easy option to buy now and pay later. By owning a good credit card you can have all the stuff that you have always wanted to buy, but were unable to do so because of not the having money in hand.

Having a credit card with a decent credit limit may sound like the solution to all your problems. After all, who wants to wait till pay day to buy all the glamorous stuff which everyone dreams of? However, it is not everyone who can afford to use the credit card to enjoy all the glitz and glam in life.

Your credit limit, the interest rate you pay at and even if you can get another credit card all depends on your credit score. In today’s online era, essentially every business has hired some sort of a digital marketing firm. They attract you with all the benefits of owning a credit card.

Imagine, you are impressed by a credit card company, their usage of SEO services has made you fall for them. You finally decide to buy another card. You go to their website and fill in all the forms. After all the verifications and formal procedures, the company finally informs you that they are unable to issue a credit card to you because you have a really low credit score.

What is a Credit Score?

Define Credit Score

A credit score is simply a numeric value that ranges between 300 and 850. This is a unique number that depicts your creditworthiness. The higher the number, the better is your credit score and the better you seem to a lender. A high credit score posits that the person is less likely to delay payments. The decision making process of a lender is highly affected by your credit score. On the basis of the credit score, the lender decides whether to lend anything to the concerned person or not. Therefore a good credit score is a must have for an easy life. 

The benefits of a good credit score are not only limited to getting another credit card. A good credit score also has a large number of other benefits. For e.g. landlords use it to determine who to rent their property, insurance companies us them to set different types of premiums, cell phone companies use them to tailor plans for you.

Credit scores are an effective financial tool which can give you the greatest benefits, but the amount of benefit they provide to you depends on how well you treat your credit score. This article explores the various ways, through which you can improve your credit score.

Have a Flawless Payment History

Perfect Payment History

A key factor in determining credit scores is your payment history. Maintaining a long, flawless history of on-time payments can significantly increase your credit scores. This can be achieved if you just ensure one simple thing. Never miss out on loan or credit card payments by more than 29 days. If your payments  arrive at least 30 days late, they have increased chances of being reported to the credit bureaus and hurting your credit scores.

Automatic payments are a good option to clear the minimum amount due. They can help you avoid missing a payment. In case of difficulties paying the bills reaching out to the lender might be a good option. It is likely that they would understand your difficulty and sort out a way that is beneficial to you both.

Accounts that don’t generally appear on your credit reports for instance gym memberships and subscription services are also important to stay on top of. This is a small thing which might not help your credit, but still prove to be beneficial. Your account being sent to collections could seriously damage your score.

Limit New Account Applications

Limit Account Application

Generally limiting how often you submit credit applications can prove to serve your purpose. Digital advertising agencies make the offer so intimidating that you are sure to keep opening new accounts.  Although, the need to open accounts to build your credit file is eminent; each application that is submitted, leads to a hard inquiry.  This hurts your scores a little, but these inquiries are beneficial for your credit score. They can add up and improve your credit scores through a compounding effect.

Another major factor that can affect your credit score is the number of applications you submit. The average age of your accounts is decreased by the opening of a new account.  This in turn could also hurt your credit score.  

An exceptional case is when you do rate shopping. Rate shopping includes certain types of loans, for instance, mortgage or an auto loan. Credit scoring models are programmed to recognize that rate shopping is not a risky behavior. This also may lead to ignorance for some inquiries that take place within a couple of weeks

Ask for higher credit limits

credit limits increase

Ask for a higher credit limit, but don’t spend your balance for a little time. If your credit limit is up and your balance remains constant, it is very beneficial for the credit score. Inquiring about a higher limit, without a hard credit inquiry from your credit card issuer can be good idea.

This may drop your score points temporarily, but it may be beneficial in the long run. adding  more years of credit experience gives you the probability of a decent shot at getting a higher limit. An increase in income will also serve to fulfil your purpose.  During this time of  the COVID-19 crisis, you may find some issuers to be willing to work with you  

Have a Credit Mix

good credit mix

It would be a good idea to consider getting the type of credit you don’t have, because if you have only credit cards or only loans, they may be detrimental to your score. Having a good credit mix can help to improve your credit score. Having both revolving credit and installment accounts, such as credit cards and loans, can boost your perceived creditworthiness.

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