A credit score is a major contributing factor in indicating an individual's financial health and conveys a person's financial risk to potential lenders. A higher credit score can help you get better interest rates on loans, as well as open up more doors when it comes to finances. However, many people have had some sort of financial setback in their life and may need to repair or improve their current credit score to be approved for a loan.
It can be hard to know where to start when thinking about improving your credit score but don't be discouraged as a credit score can always be improved!
Check Out Your Credit Report And Current Credit Score
Before you begin taking action in trying to improve your current credit score, it is important to assess your current credit report so you can see where you stand.
You may not realize this, but there is a difference between your credit report and credit score. Your credit report is a collection of information about how you have used borrowed money in the past as well as any debt that you currently have open. This includes things like payday loans, student loan debt or even bills that have been paid off or have yet to be paid off. The current status of your credit report is also a factor in determining your score. If you have had any financial setbacks recently, this can be seen on your credit report and may need to be repaired before you are able to successfully improve upon it.
You can find your credit report using a credit score provider such as Equifax, Experian or Illion. Each agency has different scoring systems and what is considered a 'good' or 'bad' credit score. You can also use providers such as ClearScore to assess your current financial situation, calculate your credit score and have a look at your credit scores health.
While assessing your report you will need to carefully look for any errors or mistakes on your report that could have a negative impact on your score such as missed payments or late payments. If there is an error, it is a good idea to dispute it and provide as much information as possible.
Pay Any Outstanding Debts or Bills
It may seem obvious, but paying your bills on time, as well as not going over your credit limit are both great habits to have when it comes to maintaining a good credit score. If you can prove that you are reliable and can handle borrowing money responsibly, this will reflect positively on your credit report.
A great way to ensure that you don't miss any bills or payments is to set up automatic payments. Late or delayed payments can reflect poorly on your credit report and dampen your credit score. Keeping track of your debts and bills can really go a long way in making your credit report seem much more attractive and improve your credit score.
Limit Your Credit Usage
Another great way to improve your credit score is by limiting the number of open credit lines you have available. The more loans and accounts that are currently being used, the lower your credit score may become. If you want to improve your credit score, it may be beneficial to reduce or close any unused accounts so they aren't negatively affecting your credit score.
However, it is important to note that you don't want to close any old accounts that have been open for a long time. This is because your credit score takes into account the length of your credit history. The longer your credit history is, the better it looks for your credit score. Limiting new or rarely used credit cards or loan providers should provide positive results.
Avoid New Loans Or Credit Applications
When you are trying to improve your credit score, it is important not to apply for new credit cards or loans. Each time you apply for credit, the lender will do a 'hard pull' on your credit report. This will ding your credit score a little bit and could make it more difficult to improve your score.
If you are in need of a new credit card or loan, try to apply with the same lender so that it will only count as one hard pull on your credit report and build rapport with your current provider.
Look Into A Financial Counsellor
When it comes to improving your credit score, you can always consider speaking with a financial counsellor. They will be able to help identify any bad habits that may be keeping your score low and they might also offer some useful advice on how you can improve upon them.
If you're feeling overwhelmed with your credit score, or just want some more help in improving it, speaking to a financial counsellor may be the best step for you! Even doing such tasks yourself and investing in a credit-monitoring service could help you stay on top of improving your credit score and being successful in your future loan applications.