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4 Tips on How to Improve Credit Score

Credit score or credit rating shows how trustworthy you are as a borrower. It is like your “grades” when it comes to credit performance. A credit rating is important because it influences your credit limit (or how much you can borrow), as well as interest rates and other terms. Hence for some of us, this is a very important grade to maintain high. For this post, we will discuss how to improve your credit score.

Before we continue, let us be clear that having a low credit score is not the end of the world. You can always improve it in time. The main goal anyway is to not get into any more debt unless it’s really important, or if you would need to loan to pour into your own business. Just in case you get into these situations in the future, improving your credit score at present will be very helpful.

You may ask, what is the credit score that I should aim for?

According to Canstar, here’s a quick guide:

Credit Score Bands

  • Excellent: 833 – 1,200
  • Very Good: 726 – 832
  • Good: 622 – 725
  • Average: 510 – 621
  • Below Average: 0 – 509

If you want to improve your score, take note of the guide below:

How to Improve Credit Score

1. Paying bills on time

This may seem obvious, but this is one of the most important credit score determinants.  Do you know that if you have more than $150 unpaid balance after 60 days, you will have a black mark on your credit report for 5 years?

What can you do:

  • Put your bills under automatic payment
  • Track your bills using your smart phone’s calendar and set alarm so you won’t forget
  • Consolidate your debts under one credit card bill so it’s easier to manage
  • If you have outstanding loans and debts, pay them as soon as possible

 

Having difficulty paying on time? See How to Budget and Pay Debts When You are Behind on Bills

 

2. Have at least one active credit account

As what was mentioned above, you need to have a good credit history to have a high credit score. If you don’t have any credits, your score would be zero.

Now, before using this as an excuse to shop after reading this blog, there are ways on how to use credit without impulse buying.

What can you do:

  • Open a mobile phone plan (of course, only the necessary features)
  • Subscribe to a low-cost internet plan (or other necessary subscriptions)
  • Make sure these are registered under your name and address
  • Don’t forget to pay before due date

 

3. Any errors in your billings or credit report, dispute the amount immediately

If you are wrongly billed, or you see a minimal error, call the attention of your creditors asap. Leaving them alone will be treated as a default and can stay for years. It is quite difficult to erase them from your credit file, so while early, be sure to attend to them as soon as you can.

how to improve credit score

What can you do:

  • Ask for your credit report and check if accurate (get reports from more than one provider for a more accurate result)
  • Keep your receipts so when your credit card bills come, you can check side by side if the charges are correct
  • They can be quite annoying, but if you see errors, attend to them before the end of the week.

Where to get credit report:

 

4. Only apply on credits which you know you’ll be approved

Every time you apply for credit, your prospective creditor will most likely inquire about your credit report. These are called “hard enquiries” which take a few points off your credit rating. (When you call to ask for your credit report, this is called ‘soft enquiry’, and does not affect your credit score).

Why you should avoid this like plague:

  • If there are too many hard enquiries on your credit report, you will look as someone desperate for credits
  • It will seem like you cannot manage your resources or debts very well
  • Credit cards on “display” are doing you more harm than good. Credit cards that are not used shows that you are not reliable

What can you do:

  • Only apply on credits where you are sure you will get approved
  • Avoid applying on additional credit cards which you don’t need
  • In case you have been turned down, wait for a while before trying again
  • If you have unused credit cards, close them so they get off your credit record
  • Do not ask for high credit limit. Lower is better.

 

So there are our 4 actionable tips on how to improve credit score. Print this guide and post it somewhere so serve as a reminder. Don’t forget to share this article with your friends who might need this guide.

If you are in deep debt and you need a consultant, avail of our free debt assessment by calling the number below.

 

 



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