Your credit score is like a report card for your finances. It speaks of your money habits and how you manage your finances on a regular basis. So, when you apply for a personal loan, home loan, car loan, or any credit, lenders consider your credit score to check your creditworthiness. It tells them how trustworthy you are with borrowing money. If you have a low credit score, it might be tough to get loans or credit cards, and if you do, you would have to pay higher interest rates. That’s why fixing bad credit is important.
There are several ways to boost your credit score. In this article, we will learn credit repair strategies and how you can work on rebuilding credit.
Ways To Improve Credit Score
Check Your Credit Report Regularly
Your credit report holds all your financial information. Hence, it is important for you to check it regularly to ensure that there are no errors in your credit report. Check if there is any mistake in your personal information and if any accounts are fraudulently opened under your name, especially if it is negatively impacting your credit score. Report any such errors to the credit bureaus immediately as fixing them can certainly help boost your credit score.
Pay Bills on Time
One of the best ways to improve your credit score is by paying your bills on time. It is of utmost importance as it shows lenders that you are reliable and can handle your money well. This, as a result, increases your creditworthiness as you would be able to build a positive payment history.
Reduce Credit Card Balances
If you have credit card debt, make sure you pay it off as much as you can. Having a lot of debt compared to your credit limit can bring your credit score down. So, paying off debt gradually can help improve your credit score over time.
Avoid Closing Old Accounts
Usually, lenders give greater preference to credit card or loan applicants who have a longer credit history and have paid off their debts on time. So, if you have an old credit account, ensure that you don’t get it closed even if you don’t use it. This may not help you immediately but will help in improving your credit score in the long run.
Avoid Multiple Hard Inquiries
If you wish to boost your credit score, it is best to delay applying for any new credit. When a lender checks your credit history to evaluate your eligibility for a financial product, it is considered as a hard inquiry. Multiple hard enquiries can affect your credit score as too many attempts to borrow credit from different sources are considered a greater credit risk to lenders.
Diversify Your Credit Mix
Having a healthy mix of secured loans like car loans or home loans and unsecured credit like credit cards or P2P loans can be good for your credit score. This is because lenders consider applicants who have handled different types of credit accounts to be more credible than those who are new to credit.
Become an Authorised User
Another good way to improve credit score is by becoming an authorised user. If you have a friend or family member with good credit, you can ask them to add you to their credit card account as an authorised user. This can help boost your credit score because you would benefit from their good credit habits.
Take Professional Help
If you are having trouble managing your debts or improving your credit score, then do not be afraid to ask for help. A credit counsellor or financial advisor can give you personalised advice and help you come up with a plan to get back on track financially.
So, these are some significant credit score improvement tips for you. Note them down and abide by them to become financially stable and eventually boost your credit score.
