If you want to benefit from low interest rates, better
lending terms, and higher credit limits, you may want to maintain a good credit
score. But if you have not followed this practice before, the many tales of
people striving to build their credit scores can be enough to deter you from
this goal.
With that being said, building and improving your credit
score is not a futile effort to say the least. When you know what to do and
what to stay away from, you can increase your credit score with consistent but
simple activities.
Interested in learning more? Here’s how to create a solid
credit foundation.
Start With a Good Credit Mix
Your credit mix is the type of lending products that you
have in your name. This includes installment accounts and revolving accounts.
Installment accounts refer to products like student loans while revolving
accounts cover products like credit cards. In order to build a good credit
score, you should have both types of accounts in your name. You can take your
time finding suitable products with actions like learning the benefits of car loans.
Regularly Check Your Credit Score
Whether you are building or repairing your credit
foundation, you should regularly check for errors in your credit report and
dispute them. By getting an annual credit report,
you can get an overview of any incorrect information like payments that you
have already made but that still show up as pending. You can then file requests
to correct that information and save your credit score from being hit by false
reports.
Don’t Fall Behind on Your Payments
This is where you can see how easy it is to create good
credit: Even something as basic as making your loan and credit card payments on
time can noticeably improve your credit score. When you don’t fall behind on
your payments, it shows that you are responsible about your borrowing
commitments. Besides setting up autopay, you can also use solutions like a budgeting workbook to calculate your monthly payments.
Be Wary of Maxing Out Your Credit Cards
No matter how much credit limit you have on your cards, you
should never use the entire amount unless there is an emergency. It’s because
when you use over 30% of your approved limit, it can negatively affect your
credit score. Similar to learning how to navigate bankruptcy, looking into these details can help you understand
the crucial nature of this requirement and how to follow it.
Steer Clear of Getting Unnecessary Credit
While following the suggestion to stay within a certain
ratio for your credit utilization, it might be tempting for you to apply for
new credit. But this can create a “hard inquiry” by your lenders and end up
lowering your credit score. Your credit score can improve gradually after this,
but it’s often not worth the risk. To find other ways to manage money, you can
look into a financial advisory service instead.
Try to Increase Your Approved Credit Limit
Continuing from the suggestion of lowering your credit
utilization ratio, you can achieve this feat by increasing the limit of your
current revolving credit accounts. In some cases, your existing lender might
not do a hard inquiry to increase your limit. This can help you improve your
credit utilization ratio. You can also look into the perks of credit repair companies and hire their services to take advantage of
similar methods.
Report Your Rent and Utility Payments
No matter if you use a rental payments platform or transfer
your rent manually, you can opt to have your rent payments reported for your
credit. You can also do this for your utility bills. This can act as additional
support for improving your credit for certain scoring models. With that being
said, you should still follow the other tips on this list because they carry
more weight for your credit.
When you follow these suggestions, you can see a stark
improvement in your credit score over time. This can help you access a slew of
financial benefits across different walks of life.
