If you want to get a perfect credit score you may need to go out of your way to do so.
Here are ways to raise your scores quickly:
Pay your bills on time
Since payment history accounts for around 35% of a person’s credit score, it is important to ensure that all bills are paid on time to avoid putting a huge dent on your score. Bills that have been due for a long time must be settled accordingly.
Accounts that have not been paid for the past 90 days attract not only your potential lenders’ attention, but the attention of credit reference companies. These long overdue accounts and even the most recent ones are precursors of negative credit score.
Be a responsible credit card holder
You can improve your score simply by using your credit card; make your payments on time so that you will qualify as a responsible card holder. Those who do not qualify for a traditional credit card can apply for a secured one to heal the credit score quickly.
Use proper timing when applying for new accounts
Every time you apply for a credit card, the company will make a hard enquiry which will be recorded on your credit file. The more checks carried out by the potential lenders to check on your credit health, the lower your credit score could get. This is because credit reference companies tend to associate these hard checks with people who are desperately trying to obtain credit. To minimize these enquiries try to schedule your applications for new accounts.
Opt for no-credit check applications
It is advisable for those who are planning to secure credits to study the eligibility criteria set by potential lenders before sending their applications. Look for lenders that allow ‘no-credit check’ enquiries to ensure that you will only send applications to lenders who will approve your loan. This will save you from compromising your score just for the sake of testing whether you can get a new credit.
Don’t over use your credit card
Your credit utilization makes up around 30% of your credit score. While you can use your credit card to increase your credit score, the moment you max it out your credit score would drop. So, as a rule—the lower is your utilization rate, the better your score. Keep it lower than 30 percent of your credit limit.
How do you calculate your credit limit usage?
Divide your credit balances with your credit limit to get your utilization rate.
Let’s say you have 3 credit cards. Credit Card 1 has a $2000 limit, Credit Card 2 has a $1000 limit and Credit Card 3 has a $2000 limit. Your total credit limit is $5000. Anything between 0-30 percent rates ($1500 maximum) is fine. Ideally speaking, limit those expenses that you make on your credit cards 1 and 3 to $600 and stick to a $300 or limit on Credit card 2.
Keep old accounts
If you have been thinking of closing your credit account, spare your oldest cards and close the most recent ones. Since your credit history takes in around 15% of your credit rating, you need to keep old credit accounts to get a higher chance of getting a better score. When you close your old accounts, you are lowering your credit score simply because you are limiting your credit history to the age of your oldest credit card.
For example, Wang has three credit cards. Credit Card A is 20 years old, Credit Card B is 10 years old and Credit Card C is 1 year old. If he closes Credit Card A, his credit history would be 10 years old. So, as much as possible, it is important to keep old cards active, even if it means you only have to charge a few extra dollars each month and repay it off completely every pay day.
Negotiate with your creditors
If you are not able to meet one or two payments try to negotiate your way out before your creditor reports your default to the credit reporting companies. Falling back on payments every now and then can cause serious damage to your score, so make sure your creditors are aware of your financial situation so that they will no longer put a collection notice on your file.
Creditors can be considerate at times. So it is important to let them know about your payment issues, especially if you have recently lost your job, went through a divorce or similar situations that made it difficult for you to cope financially. You can also request for adjustment of your payment schedules.
There are so many things in life that we cannot control, especially when it comes to life events that destroy our finances. What’s important is that we learn something from our mistakes and we make it a serious goal to revive our finances. One of the best ways to get started is to ensure that our credit score is in good shape. It may be difficult to obtain a perfect credit score, but with sheer determination and debt management strategies mentioned above, you can make it with flying colours.