It’s no secret that it can be disheartening to find yourself with a bad credit score. For some, it’s a result of bad spending habits and loans with missed payments, while for others it’s simply due to misfortune, such as an accident that has left them in debt. No matter which category you fall into, there’s good news. You can fix your credit score. All it takes is a little time and effort to get yourself back on track. Check out these 5 tips to improve credit score.
How To Improve Credit Score
A credit score is a number you are given that reflects how reliable you are as a borrower. A potential lender will look at your credit score to determine if you are worth lending money to. A high credit score means you have a good credit history and can be trusted when it comes to repaying a loan. A low credit score reflects a bad credit history due to factors such as missed repayments and defaulting on loans. Your credit score can also determine how high the interest is on a loan you take out. If you have a low credit score, a lender is more likely to charge higher interest to offset the risk.
There are a number of different things that factor into your credit score. These include:
- Payment history: Have you made all your past repayments on time? Have you paid off your past loans within the agreed-upon time period? Missed payments or defaulting on a loan can lower your credit score.
- Credit history: the longer your credit history, the better. Someone with a good borrowing history is more likely to have a higher credit score than someone who has never borrowed before.
- Credit mix: just like the credit history, the bigger mix of credit you have, the higher your credit score. This is an easy way to improve credit score.
- Amount owing: this is referred to as your credit utilisation ratio. If you have maxed out all the credit you have been given, it will lower your credit score.
These factors all help contribute to your credit score, but each one can be rectified over time to help you improve that score.
5 Tips to Improve Credit Score
Whether you are looking to take out a loan and have realised your low credit score is working against you, or just want to get yourself back on track financially, here are 5 tips to improve credit score:
1. Pay your loans on time
Sounds simple, but it makes a huge difference. While it may seem like a simple mistake to forget a bill and make a late payment, this mistake can be costly in terms of your credit score. Keep a note on your phone about when payments are due and ensure they are sent in on time. You can even consider setting up debits so another payment is never missed.
2. Use a variety of credit types
The saying goes, ‘Don’t put all your eggs in one basket’. In this case, it couldn’t be more true. If you have never borrowed before, or have always taken out the same line of credit, mix it up. The more variety you have to show a potential lender, the better your credit score will be.
3. Never throw away credit cards
One of the most simple, yet effective tips to improve credit score is to not throw away your cards. While you may think it’s best to close off any paid, unused accounts, this can actually be damaging to your credit score. Keep the account open and paid off to build up your credit history.
4. Keep balances low on credit cards
The more credit you use that is available to you, the lower your credit score. If it appears that you are already overextending yourself with credit, lenders aren’t going to look at your favourably. Try and keep the balances low to help with this and always make the repayments on time.
5. Ask for help
If you are in a position where you are unable to make the repayments or pay off a card, then ask for help. You can start with the lender and see if they are willing to negotiate on the terms, or even ask family and friends you are close to. Seeking help will make sure you don’t spiral further into debt. You can also get professional help from companies that specialise in this area.
If you have followed each of the above tips to improve credit score and you still need help then Clean Credit is here. If you are after some professional help to increase your credit score, contact the team at Clean Credit today.
We can look through your credit score and your personal situation to devise a plan to help you get out of debt and bring up your credit score. Simply get in touch today and get on track to improve your credit score.