finance-training

How to increase your credit score

A credit score is a three digit number that tells someone how likely you are to repay a debt or a loan. Banks and lenders decide on whether they should give you the money or not based on your credit score. So it’s good to have a high credit score. However, it is not that easy to increase your credit score, especially if it has been damaged by debt. Here are some steps to increase your credit score.

Watch out for your credit card balances

You should keep a watch on your credit card balance and how you spend. Your credit score depends on how much credit you have vs how much you are using. The percentage should be low for a good credit score. So, when your balance is less, you should spend accordingly, this is not just for the sake of saving your balance, but to also keep a good ratio.

credit-card

Eliminate credit card balances

John Ulzheimer, a nationally recognized credit expert said, “A good way to improve your credit score is to eliminate nuisance balances”. Those are the small balances you have on a number of credit cards. One of the major things that your score considers is just how many of your cards have balances. Hence, spending some amount on one card and some amount in another account instead of using the same card, can hurt your score. The solution to it is by paying off all the small balances you have.

Pay up on time

The biggest point in a good credit score is monthly on-time payments. If you are bad at paying up your debts or paying them on time, then your score will take a hit each time. This is often the primary reason for a credit score being low, so prevention is key in order to keep your score high. You can actually use credit cards to help you pay off your debt (see SoFi’s offering here – https://www.sofi.com/credit-card/) as well as have increased saving and investing methods to improve your financial situation.

This normally happens when you buy something which is worth a lot – like a vehicle, or luxury items – and you simply do not have enough in the bank to cover this cost. It can also happen if you are bad with money and don’t have enough to pay off your debts by the end of the month. You have to make sure that you will be able to pay it every month and make sure you don’t miss out on the payments.

If you are struggling with money and debts there are several ways to help with these. A debt consolidation service or debt help service could help you manage your debts and create a plan for paying them off. To improve your ability to manage money try establishing a budget and deeply analyze what you need each month and what is a luxury you need to lower spending on. After you have created your budget you can look at ways to lower current spendings as well, such as looking for special offers on Raise to save money when you have to shop for items. Using these resources, being able to pay your debts on time should become easier, and growing your credit score can become easier.

Don’t try to remove your debt history

It is a common misconception that having old debts in your credit report is bad. The minute some people are done paying up their debts, they immediately try to remove it from their credit report. Negative items are obviously bad for your credit score and most of them will be removed from your report after seven years. Good debt, on the other hand is beneficial for your credit score. Good debt means the debt that you have handled well and paid off. They might have a huge hand in increasing your credit score.

These are some of the things that would help in increasing your credit score. Keep in mind that it is not a fast process. It is a gradual one. You can keep these in mind while handling your credit score.