5 Tips to Improve Credit Score
Credit rating is a measure of financial creditworthiness. A person’s rating reflects their potential to repay debts and how likely they are to default on loans. A good credit score is essential because it can affect the interest rates one pays when taking out loans or buying things on credit.
1. Get a Copy of the Credit Report
Everyone who has a credit rating or is thinking about going into debt should get at least one free copy of their report from an online company. A report will contain everything related to their past year’s financial activity and history, including records of all the loans they’ve taken out and how much they still owe. It also shows current account balances, credit inquiries, delinquencies, and other details that may affect their score negatively or positively.
2. Apply for a Loan Only When Necessary
Most banks and credit unions offer a variety of products that may seem attractive to consumers, but there is a catch. Each application for a product gets noted by the FICO score and can damage the score if it’s not paid off immediately. According to Jordan Sudberg, if a person feels they need more credit, they should talk to their lender first before applying to see if they can get approval before applying elsewhere or going into debt with another loan.
3. Pay Debts on Time
Small amounts of late payments can damage a person’s credit score. Late payments can lower the credit score even in the case of excellent financial habits, such as paying back all outstanding debts on time each month. Lapses in payment history can also cause borrowers to report to credit bureaus as having a low credit rating and a higher risk of defaulting on loans. Sometimes, a person’s credit rating could get destroyed badly enough that it becomes difficult to get loans or lines of credit approved in the future.
4. Keep Communications with Lenders Open
It’s always best to keep communication lines open and maintain good relations with lenders. If a person is having problems repaying a loan or line of credit, they should speak with customer service representatives for options for repayment plans or debt settlement.
5. Learn to Use Credit Wisely
Jordan Sudberg believes that a person should put as much effort into learning how to use credit wisely as they do in getting their education and job of choice. Credit cards can be helpful, but it’s best to get one that is not connected with a store that sells items on credit since these tend to come with the highest interest rates. Instead, the best option is to get a card that offers a low-interest rate and rewards for things like signing up for automatic payments or paying off balances early. A person should avoid carrying a balance on the card and try making two small payments every month instead of one large one.
Being wise with credit is a great way to build a good credit score and make things better in the future. The key is to stay on top of the score at all times. By checking online and with customer service representatives, a person can make sure that they’re building their credit rating as much as possible.