Are you curious to know how to improve your credit score or even determine how fast your credit score can go up? Read on to discover more.
Maintaining a high credit rating is one significant factor that will positively reflect your financial health; that is why you must strive to have an edge.
It enables prospective lenders to know how good you are in credit management, which becomes a major contributing factor that will count for your approval or otherwise.
In addition to getting approved for loans in the future, a high positive credit score can also help you collect loans with the lowest possible interest rates.
There are so many reasons why you must strive to keep a good credit score, and if you are ready for it, you need to be aware that there are different tips and ideas on how to have a high credit score that you can implement to have leverage on your credit score.
The best, direct, and easiest way to get your credit score to stay at its peak is to pay off your credits on time and efficiently use your credit cards.
To up your game, there are specific ideas that I will share in this article but before going into that, Let’s cover the fundamentals of the credit score.
What is a Credit Score?
A credit score is a number that gauges the financial credibility of an individual.
It is a measure of one’s creditworthiness and a reflection of your ability to pay back money loaned to you.
It is the determinant factor lenders use to assess how well you respond to your previous loans.
Therefore, the higher your score, the better you are entitled to access new loans.
What Factors Determine Your Credit Score?
Now you might be wondering, what are the things that determine one’s credit score?
The credit score is determined by a specific algorithm set up by the credit bureau that revolves around one’s credit record.
There are around five key factors that contribute to your credit score:
1. New credit
2. Types of credit
3. Length of credit history
4. Payment history
5. Total amount owed
Your credit score can be boosted by looking within those five; they will go a long way in determining how to have a high credit score and how fast your credit score can go up.
Fortunately, the five tips we talked about are refined based on those factors.
On What Scale Is Credit Measured?
It ranges from 300 to 850. A score of 650 or higher signifies good credit, while scores below 620 are considered low. If you’re looking for good credit, you’ll want to make sure your score is above 650.
Despite different credit scoring techniques or systems used by financial institutions worldwide, the FICO score, commonly used in the United States.
Your credit rating in FICO varies from 580 to 800, including:
<580 is considered as Poor
580-669 is Fair
670-739 is Being Good
740-799 is Very Good
>/=800 is Excellent
How Can I Access My Credit Score?
Since you now know the basics about credit scores and the widely used system for interpreting them, you want to learn how to access yours at financial institutions.
Fortunately, you are entitled to a free copy of your credit score annually at any of the following places:
So, if you’re wondering how fast your credit score can go up, this will depend on your current score and the plan and efforts you are willing to put forward to improve it.
To sustain a good credit score, you must consider implementing some tips and ideas to give lenders that sense of confidence, allowing you to access their loan offers with better interest and realistic payment plans.
Loans are not the only perks of keeping a high credit rating; however, having access to apartments, etc., is also inclusive, so let’s dive right into the tips and ideas.
1. Diversify Your Credit
A good way to build and improve your credit score is to use it and diversify it. The more diverse your credit is the stronger your credit profile.
Lenders also look at the variety of credit on your credit profile to understand your credit history and determine your credit worthiness.
This means a profile with two or three well-managed lines of credit is better than one with only one line of credit.
2. Pay Your Bills On Time
Missed payments reflect on your credit report and are a poor reflection of your credit worthiness. Try to make your payments on time every month and never miss or go past the due date.
In fact, if you can, pay well before the payment due date and give room for any possible bank delays by your bank to the credit company.
3. Keep Your Usage Low
The ideal credit usage is 30%. Keeping your credit usage below this level will help to strengthen and improve your credit score.
Not only is this a factor that affects your credit score, but lenders often look at your credit usage as a reflection of your general dependence on credit.
4. Keep Your Credit Accounts Open
Closing your credit card account has a minimal edge for having a high credit score.
It is preferable to leave it open, and if you still want to close one of your lines of credit, ensure that this does not have any significant negative impact on your credit score by paying back the outstanding amount due.
Even when your credit card isn’t running on a negative balance, the closure is still likely to have a negative impact on your score.
Additionally, credit length is an essential factor that is used to determine your credit score. The older your lines of credit, the better.
It contributes to approximately 15% of your credit score.
5. Go Beyond the Minimum Payments
This is an underrated way to improve your credit score, but the more of your debt you pay off every month the better.
Your lender will often have a minimum payment due amount posted on your account every month. Aim to pay higher than this amount every month as much as possible.
The minimum payment should be your worst-case scenario, so don’t think of it as a benchmark.
A great tip that you need to implement to enhance your credit score is to pay more than the minimum refund every month.
This will allow you to pay those bills even quicker, and if you have more bills to settle, this will also help reduce their number over some time.
6. Be Frequent With Your Payments
If possible, consider making minor payments towards your bill during the month.
These are called micropayments.
While the number of times you pay your bill does not affect your score directly, it influences your credit utilization.
It helps you pay back for the month without feeling that a significant portion of your income fell away.
As this lowers your credit utilization, it lowers the total amount you owe, which has a 30% contribution to your credit score. So make it a habit to pay off some of your debt whenever you have extra money lying around.
7. Keep Your Credit Account Openings to a Minimum
As much as you’d want to develop your credit file, you should restrict the number of credit applications you submit.
This is because any of the applications you submit might trigger a hard pull (a term used to describe a situation when a creditor asks to review your credit file), which, along with your various other requests, may aggravate the effect at the expense of your credit rating.
Your average account age is another factor that drives high credit rating, and opening a new credit account will cut back the figure, impacting your credit score.
8. Evaluate Your Credit Report
We talked about the places where you can get your credit report; the listed three are but a few of the places you can get these reports from.
So, you should grab a copy of your credit report and review it to see if things are going well or need improvement.
While this report may help you make amends, it can also help you understand any error or flaw that may cause some impact on your credit score on the financial institutions’ side.
Make sure to have a close and attentive reading of it.
If you think of any information you believe is inaccurate, do not hesitate to draw the attention of the credit bureau by opening a dispute to resolve it so as not to waste your chances of future credit approvals.
9. Increase Your Credit Limit
Once you have built trust and have been consistent with paying your off your balances. You can contact your lender and ask them to increase your credit limit. Bear in mind that you need to be able to back up your good payment history in order to be considered.
Sometimes your lender will automatically increase your limit if you have been consistently paying off your account. But if they don’t, you can contact them and present your case.
10. Dispute Credit Report Errors
It’s not unusual to find errors on your credit report. When you review your credit report and find that there is an error, you should dispute the error to have it corrected.
Common credit report errors you can dispute can be hard inquiries and new lines of credit you did not authorize or errors in your personal information.
In conclusion, the number of open accounts you have, the cumulative debt levels, and your payment history are the main factors that drive your credit score.
These are some of the factors used to determine one’s credit score. Therefore if you pay attention to these and work on them, you will be able to build a strong credit profile.
Grab a copy of 101 Effective Ways To Build Your Credit Below.
- How to Monitor Your Budget & Keep Track Of Your Spending
- How to Avoid Getting Into Debt (9 Alternative Ways)
- 10 Best Personal Finance Apps To Manage Your Money
- 10 Best Budgeting Apps to Help You Save Money
- 7 Types of Budgets and Examples to Help You Get Started