How to Improve Your Credit Score

While it is not impossible to get approved for loans with a poor credit score, it is certainly more difficult and oftentimes costs you more money in the long run. If you have a poor credit score right now, you are in luck! You can improve it with these tricks.

Make payments on time

One of the most important factors that determine your credit score is your payment history. If you miss a payment by more than 30 days, then it can be reported to credit bureaus. When it gets reported to the credit bureau, it impacts your credit score.

A credit score is a specially calculated number that tells lenders your creditworthiness, or how likely you are to make payments back on the money you have borrowed. So, if you are missing payments on the money you have borrowed already, then you are telling future lenders you cannot be trusted to pay back their money.

If you already have missed payments, work on catching up and becoming current. Showing that you can make payments will improve your credit score. Yet, the best way to avoid this situation is to make the payments on time. Setting up reminders when payments are due or setting up automatic payments will help you stay up to date.

Increase your credit limit

Just because it is there, does not mean you need to spend it all. Credit utilization is another heavy factor in your credit score. Calculating your credit utilization is based on how much you spend using a credit card. When you apply for a credit card, a financial institution will approve a lump sum for you. If you keep your spending below 30%, then you exhibit healthy financial habits and that will improve your credit score.

If the way you utilize your credit cannot be helped, ask your credit card servicer to increase the credit limit. If the increase doubles the amount you were previously approved for, then you are no longer utilizing 30% of the funds. As long as you can get approved for more, this is an easy way to improve your credit score… just don’t go spend the new acquired amount.

Limit your inquiries

Every time you apply for a credit card or loan, the lender is pulling your credit report to get your credit score. If you are applying for several lines of credit within a couple of months, you are ticking your credit score lower and lower. With each “hard inquiry”, your credit score takes a hit. While one inquiry loses a small amount of points and does not affect your credit score greatly, the points will add up with each inquiry. Say each inquiry takes away 7 points and you have 10 inquiries in less than 6 months. Your credit score has likely dropped by approximately 70 points.

Inquiries do not stay on your credit report long term like missed payments. Yet, they do take up to 24 months before they disappear. So, if you have a lot of inquiries in a short amount of time, it will be a while before they will fall off the report. Good news, they will. It will just take time.

When you take the leap to improve your credit score, you also improve your financial health. Implementing these tricks will bring you closer to achieving your life goals. If you want to learn more about credit scores, visit one of these sites: Experian, TransUnion, Equifax.