Your credit score plays a vital role in whether or not you qualify for loans and credit cards, with higher scores leading to better rates and fees.
Raising your credit score can be achieved by making payments on time and using credit cards responsibly, but there are also some strategies you can do to speed up this process.
1. Pay Your Bills on Time
Paying bills on time is an integral component of building good financial habits. Failure to do so could damage your credit, incur late fees and increased interest rates, as well as increase the odds that future credit will be denied to you.
One way to avoid this hassle is by setting up autopay for your monthly bills. Whether using your bank or the service provider’s website, autopay can provide an easy and effective way of staying on top of bills and making sure they’re paid on time.
Establish reminders for your bills via alarms on your phone, emails or an online calendar. This could help ensure timely payment.
Alerts will make paying your bills easier by helping ensure you don’t forget them and miss the due date, saving money in late fees or penalties by not missing payments.
2. Keep Your Credit Card Balances Low
One effective strategy to raise your credit score is keeping credit card balances to a minimum, signalling responsible use. This will prevent overextending yourself when it comes time to repay loans and increases the likelihood that creditors will approve.
Maintain a proper credit utilization ratio (CUR) across each of your cards to make sure you’re not carrying too much on any. CUR is calculated by dividing total balances on cards by their available credit limits;
If your credit utilization ratio is too high, ask card issuers for an increase to your credit limit to reduce it. Just be wary not to go too far with these requests or they could result in hard credit inquiries and cause your score to suffer as a result.
3. Don’t Apply for New Credit
If you are trying to improve your credit score, it is wise not to open too many new credit cards at once, as doing so may temporarily lower your score and make it more difficult to obtain loans like mortgages.
An application for multiple credit cards within a short period can signal to lenders that you’re seeking more credit than is affordable.
Before applying for a new card, it is wise to wait a few months. This will increase your chances of approval.
When applying for a credit card, keep in mind that 35% of your score relies on your payment history – therefore making timely bill payment essential!
4. Make Two Payments Instead of One
One of the easiest and best ways to increase your credit score is paying your bills on time. Late payments can cause steep interest rates and ruin your history. For added peace of mind, set up automatic payment reminders on bank or credit card websites so you don’t forget your payments; use budget-friendly credit cards with low APR and fees so you don’t spend more than necessary; also use debt management tools so you don’t slip into debt in the first place.
An effective way of doing this is making two payments each month, at least partially and fully, which will allow you to both reduce debt, improve credit rating and save some cash in the process.