Raising Your Credit Score
The importance of a good credit rating should not be underestimated. Not only does it help you save thousands of dollars per year in interest, it also helps you gain approvals for loans and rental applications more quickly.
A number of experts have compared credit rating improvement with weight loss. It takes work to achieve the desirable results, but it can be done.
The first step to improving your credit score is to first know where you stand right now. You can request for a free copy of your credit report online, but it is always good practice to check up on your credit once every quarter.
If you need a boost in your credit score, here are five simple ways to push your score in the right direction:
- Review your credit report thoroughly. It is normal for credit reports to contain errors. It is your responsibility to go through every line item in detail. In particular, check if the unpaid balances listed on your accounts are correct. If you find any discrepancies, make sure to report this with the credit bureau immediately.
- Pay your bills on time. Your credit score is highly influenced by your payment history. In short, the more you pay your bills on time, the higher your credit score will be. While this may sound like a very simple tip, most debt gurus claim that many people often overlook it. To ensure that you pay your bills on time, consider enrolling in automatic payments through your debit card.
- Use your credit cards sparingly. Even if you can pay your credit card bills in full every month, maxing out your credit card is never good for your credit rating. Experts recommend that you should use as little of your available credit as much as possible. 30% is the suggested credit utilization ratio, but aiming for 10% is even better.
If you want to use your credit card more often but do not want to hurt your credit utilization ratio, consider making multiple account payments each billing cycle. Just make sure you do this before the statement closing date so you don’t risk getting into any late payments.
- Ask for higher credit limits. While it may seem counter-intuitive to do so, asking for a higher credit limit actually allows you to use your credit card more often while lowering your credit utilization ratio. The good news is that most credit card companies are quick to give you a limit increase. Just make sure you don’t spend more as a result.
- Negotiate with your creditors. Not a lot of people know that it is possible for you to ask for a goodwill adjustment from your creditors. This is most helpful for individuals who have maintained good credit ratings before being suckered into a misfortunate event such as unemployment. All you have to do is write a letter to your credit card company emphasizing your previous good history and request that your late payments be removed from the credit report submitted to the bureaus.