3 Easy Ways To Raise Your Credit Score
Good credit is necessary for practically every aspect of life. It’s a necessity when applying for loans or mortgages, buying car insurance, and even picking up your groceries at the checkout line! If you’re looking to improve your credit score, there are a few easy things you can do. Check out these three tips and see your score start to climb in no time.
1. Maintain a mix of different types of credit
A credit score is a numerical representation of your creditworthiness, and it is used by lenders to determine whether or not to extend your credit. There are a number of different factors that go into calculating your credit score, but one of the most important is your credit mix. This refers to the variety of different types of credit that you have in your name.
For example, having both a revolving line of credit (such as a credit card) and an instalment loan (such as a car loan) can help to boost your score. That’s because it shows that you can responsibly manage different types of debt.
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2. Request higher limits
If you’re looking to raise your credit score, one strategy you may want to consider is requesting higher limits on your credit accounts. This can be an effective way to improve your credit utilization ratio, which is one of the key factors that make up your credit score.
Utilization is calculated by dividing your total outstanding balances by your total available credit; the lower your utilization, the better. So, if you have a $5,000 balance on a credit card with a $10,000 limit, your utilization ratio would be 50%.
But if you were to request a higher limit and get approved for a new limit of $15,000, your utilization would drop to 33%. This would be a positive change that could boost your credit score over time.
Of course, it’s important to keep in mind that requesting a higher credit limit can also lead to the increased temptation to spend. So be sure to only request a limit increase if you’re confident you can handle it responsibly.
3. Stop ignoring collection accounts
If you have debt that’s been sent to collections, it can be tempting to just ignore it and hope it goes away. But this is actually one of the worst things you can do for your credit score.
Collection accounts are considered a sign of financial distress, and they can seriously damage your credit score. In fact, having even one collection account on your credit report can lower your score by 100 points or more.
So if you have debt that’s been sent to collections, it’s important to take action right away. The first step is to contact the collections agency and try to negotiate a payment plan. If you can’t afford to pay off the entire balance, at least try to make a payment each month until it’s paid off.
This will help improve your credit score over time and show lenders that you’re capable of paying back what you owe.
Why should you care about your credit score?
Credit scores are important because they are one factor that lenders look at when considering a loan. A high credit score means you’re a low-risk borrower, which could lead to a lower interest rate on a loan.
A low credit score could lead to a higher interest rate and could mean you won’t be approved for a loan at all. In addition, your credit score is a factor in determining the deposits you may have to make for utilities and rental agreements.
A high credit score can also lead to lower insurance rates. And if you’re ever planning to buy a house or car, your credit score will be front and centre.
Having bad credit can have a number of negative consequences. For one thing, it can make it difficult to obtain a loan or other form of credit. This is because lenders often use credit scores to determine whether or not to extend credit to an individual. If you have a low credit score, this may indicate to lenders that you are a high-risk borrower and they may be less likely to offer you a loan.
Having bad credit can also result in higher interest rates on loans and other forms of credit. This is because lenders view borrowers with bad credit as being more likely to default on their payments. As a result, they will often charge these borrowers a higher interest rate in order to offset the risk.
Another downside to having bad credit is that it can make it difficult for you to rent an apartment or get a job. This is because many landlords and employers now run credit checks on prospective tenants and employees. If your credit score is low, this may lead them to believe that you are irresponsible and may not be able to make your monthly payments on time. As a result, they may be less likely to offer you an apartment or a job.
Simply put, your credit score is important because it can save you money. So if you’re not monitoring your credit score, now is the time to start.