Are you looking forward to improving credit score? Well, you need to be aware that it will not happen in one night! Consider credit score like a driving record that must be accumulated over the years. The score factors years of personal financial behavior to give a clear impression of personal creditworthiness. In this post, we look at 7 most effective strategies for improving your credit score.
Follow the credit card balances carefully
One crucial component when computing the credit score is the revolving credit versus the actual amount one is using. If you can maintain this at lower than 30%, the better. For people with multiple credit card balances, it is very important to consolidate them using a personal loan.
Note that it is still possible to have higher utilization value even when the balances are paid in full every month. This is because there are issuers who use the statement balance to report to the bureau. To address the issue, it is important to talk to the issuer and ask to make multiple payments throughout the months.
Clear all credit card balances
A great way to raise your credit score is clearing those nuisance balances (small balances on various cards). This strategy helps to boost the score because bureaus factor the number of cards with balances. Therefore, using several credit cards with $30, $20, and $50 instead of just one card is more harmful to your credit score.
The solution to getting it right on the credit score is gathering all the credit cards that have small balances and clearing them off. Then, pick just one or two cards for regular use. This will reduce the problem of polluting the credit report with many balances.
Do not remove old debts from your credit report
Many are the people who hold the view that the old debts are not good for their credit score. The moment they clear the debts, the next move involves all efforts to clear the debts from the report. Though negative items are no good for your report, eliminating them after clearing is equally a very bad idea.
All the old debts contribute to your personal history and will work towards a better score. Therefore, trying to clear the bad old debts is like eliminating all “Cs” and leaving “As” in your academic reports. Because the old debts have already been cleared, leave them intact on the credit report, and they will be removed automatically in 7 years.
Make sure to pay all bills on time
Are you planning to make major purchases? It is important to set your finances right. You do not want to start getting late with bills because they will pull down the score. Even if you have some savings sitting pretty well, consider using some of them to avoid scuttling the dream of improving the credit score.
Note that credit score is computed based on items on the report. It is important to point out that falling behind schedule when paying bills even on items that are not associated with credit reporting can still pull down the score. This is because even creditors such as libraries that never reports to agencies can still reach to collection agencies.