The term “credit score” is synonymous with your adult life. It began in 1989 as a way to limit social class prejudice. Instead, it’s based on an individual’s ability to repay loans promptly.
You’ll need a good credit score to do anything in modern times—like buying a house or car. However, everyone’s financial situation is different, which could lead to some having lower numbers. So if you’re looking to boost your credit score, here are a few ways.
1. Have Credit Cards for Different Purchases
Borrowing money is something you should do sparingly because you don’t want to put yourself in a financial hole. But for certain purchases, it helps to have different credit cards because it shows how well you can handle financial responsibility.
For example, say you were looking to buy jewelry. It would benefit you greatly to apply for a card from credit jewelers. The credit jewelers can set you up with a budget plan to give you affordable monthly payments. Plus, making monthly on-time payments to credit jewelers can help improve your credit score.
You could also have a credit card only for your car loan. So instead of using the card from your credit jeweler, it’ll be easier to manage the payment since it’s on a different account. As you continue paying off your balances from multiple accounts, it shows lenders your money management skills and makes it easier for you to apply for loans in the future.
2. Limit Your Credit Use
A lot of factors make up your credit score. But one of the most important components is your credit utilization. Essentially it’s the amount of credit you use divided by what you have access to.
So let’s say you were approved for a credit limit of $5,000 and charged $1,000 to your card; your utilization would be 20%. While it isn’t bad, you want to try and keep it under 10% because a monthly report gets sent to credit bureaus. You may not have the best credit terms for future loans if they see a high utilization rate.
To keep your credit utilization below 10%, here’s what you can do:
- Use your credit card for essential purchases like gas or groceries
- Make extra payments on large one-time purchases during a billing cycle
- Split purchases between multiple credit cards
3. Fix Credit Report Errors
Sometimes your credit score can be affected through no fault of your own. It may be from a bank’s reporting error, so reviewing your credit is essential.
The easiest method is to request a credit report from a credit agency. It doesn’t matter how minor the error is; if your credit score is affected, it can impact your ability to borrow money in the future. But you’ll see the change once the bureau fixes the mistake.
4. Periodically Request Credit Increases
You can periodically ask for an increase on your limit if you have a decent credit history. The process can differ by company, but you can often request a boost online. The bump in your credit limit gives you more access to money, but it can also help lower your credit utilization.
However, here are two things to be aware of:
- Don’t request an increase on a new card
- Ask for an increase without subjecting yourself to a hard inquiry
When you ask for a credit boost on a new card, most companies will deny it immediately, even if you have an excellent credit history. Also, when requesting an increase, always start small. Larger sums could prompt the company to ask for more information, resulting in a hard inquiry. If this happens, deny it, so you don’t lower your credit score.
5. Always Pay On Time
You should never miss a credit card payment. It’s an essential factor in determining your credit score. Once you miss a payment, you’ll be subject to late fees, which severely affect your credit rating. It also hinders your ability to secure loans in the future.
You don’t have to pay hefty monthly sums on your credit balances. Paying the minimum amount is better than nothing. That way, your account stays in good standing, and you can continue to raise your score.
Boost Your Credit Score With These Suggestions
Credit scores aren’t the end-all-be-all, but they’re significant. They impact your ability to secure mortgages and car loans. So if you’ve done a recent credit check and think your score needs some improvement, follow the suggestions above.
Have various credit accounts, limit your utilization, fix any credit report errors, request small increases, and always pay on time during a billing cycle. Then you’ll slowly see your score increase, which will impress lenders and make your life much easier.
