4 Effective Ways To Significantly Improve Your Credit Rating Fast
There's a lot at stake with those 3 digits.
That's because your credit score can greatly influence your eligibility for new loans, whether your rental application is approved by the landlord, the interest rate on your mortgage and how much you'll pay in auto and home insurance rates.
In fact, when you have an excellent credit rating, you can easily save a lot of money, but if it is low due to some poor financial decisions you took in the past, then don't worry about it.
There are many things you can do in order to improve it and below we're going to take a closer look at some of them.
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1. Always pay your bills on time
Did you know that your bill payment history accounts for approximately 35 percent of your credit score and also includes payment of your utility bills, mortgages, car loans and credit cards?
The greatest impact on your credit score comes from recent late payments in your credit history. To avoid getting it lowered even more, make sure that you never miss making payments again, since this can be a very costly mistake.
You may have a busy life and have lots of things to take care of on a daily basis and this means it can be easy to forget to make payments on time.
If that's the case, then it's best to use online reminders to help you remember to pay your bills.
In fact, some banks have special programs in place where they can send you a text message or an E-mail at a certain date in the month reminding you about the upcoming bills you need to pay.
2. Pay down your debt
Tackling credit card debt first is generally one of the best ways of increasing your credit score.
While it's true that paying off your mortgage or student debt can improve your credit rating, the biggest positive impact on your credit rating is when you finally get rid of your credit card debt.
To do this, you need to get your balances below ten to thirty percent of the credit limit on each card.
Depending on your case, you may need to consider taking out one of no credit check payday loans online to pay off your debt and avoid making late payments.
Just make sure that you make it a priority to pay off the cards that are closest to their limits instead of focusing on paying those that have the highest interest rates.
3. Old lines of credit should not be closed
A lot of people believe that closing your old lines of credit will improve credit score, but that is not true.
In fact, around 30 percent of your credit score is determined by how much available credit you're actually using, so if you have a lot of available credit, but only use 20% of it for instance, then this strategy can certainly help improve your credit score.
Many of us also have one or more credit cards that we don't use anymore and if that's the case with you as well, then don't even think about languishing them.
Instead, use them from time to time for small purchases and don't forget to pay them off in full every month.
4. Keep the balances low
Just because you have a credit limit of $15,000 for instance doesn't mean that you should spend anywhere near that amount.
How come? Well, if you keep spending lots of money, then this won't help improve your credit score.
The reason is because the utilization ratio or the amount of money you spend from your available credit is the 2nd largest element that influences your credit rating.
If lenders see a significant difference between your card's maximum balance and your balance, then you won't be seen as a risk anymore and this allows you to eventually improve your credit rating and become eligible for lower interest loans.
To check the maximum limit of your credit card, check the most recent statement and plan on spending only 30 percent of that amount.
Better yet, if you're financially disciplined, then you can limit yourself to using as little as 7 percent of your revolving credit line which is going to have the biggest positive impact on your credit score.
Just make sure you do this with every credit card you have, since creditors will compare the credit limits you have on each card with the total amount of money you owe them.