Improving your credit score may involve only a few basic steps, including low-balance maintenance, accounts opening for credit reporting, and bill payments on time. There are many ways to boost your score through timely paying bills like your utilities, cell phone, rent, insurance, etc.
Moreover, it is difficult to find where to start. Building your credit portfolio from scratch or rebuilding your present portfolio which has taken a hit, you must learn how your credit score is calculated and some basic techniques to improve it. To determine an accurate score for your account, you must provide all the required information to the credit score calculator. The credit score calculator uses computer algorithms to predict your score on some factors, including your chances of falling behind the bill payment date for more than 90 days. If you want to do a quick credit score check, here’s the tool which can easily get an accurate credit score for your account.
Let’s understand some steps to improve your credit score.
Steps to Improve Your Credit Score
Though it depends on account to account for a specific credit score improvement, generally these few steps will improve every credit score irrespective of the portfolio.
1. Create Your Credit Portfolio
You must first open your account that can be reported to the credit bureaus, card issuers, and major lenders, which becomes the important first step in building your credit score. Having some open and active credit accounts will help you in the long run, as there can be no good record stated legally unless you have accounts in your name.
If you’re just starting out or you have a low score then this can include secured cards or credit-builder loans, or some reward credit cards without an annual fee for improving an established good credit score. Also, you can add yourself as an authorized user on a credit card of someone else, which can also help you provided you use the card properly.
For people starting their credit account creation from scratch with no credit file, the basic important step is to get a credit report from a bureau. There are various types of credit score bureau service platforms, which can help you sign up for the account and provide tools to add all your payment details – cell phone, utility bills, travel, etc. to your credit report.
2. Don’t Miss Bill Payments
You might have heard this disclaimer and warning by many experts that don’t miss your payment dues. Well, your payment history is the basic foundation that factors into determining your score, and providing a long history of timely payments really helps you achieve an excellent credit score. To achieve a good score, you must make sure that you never miss any loan or credit card payment deadline by more than 29 days. As once you cross the 30 days barrier, the delay can hurt your credit scores when reported to the credit bureaus.
You can also set up an automatic payment reminder for the minimum amount due, which can help in avoiding missing the payment deadline (provided you’re careful enough to not overdraft your bank account). You may face some issues with the affordability of some bills, which can be easily settled with the credit card issuer by trying and discussing the hardship options.
As a matter of fact, you must stay on top of your accounts which generally don’t show up on your credit reports – subscription and gym memberships services, etc., which also becomes an important factor. As timely payments for these credit reports will not help revive your credit score, during collections, the account may still cause some dip in your score.
3. Revise Past-Due Accounts
When you get behind on some bill payments, you can bring them to the current payment window which really helps in the credit score calculation. While the delayed payments remain on your credit reports for up to 7 years, bringing them all to your current accounts proves good for your scores. Furthermore, this way you can stop adding to the late payments credit history to your account, and also ignore any additional late fee for the same.
If you’re facing issues with your credit card debt, you must consult a good credit counselor and a good option will be to get on a debt management program. This way, the counselor can easily help you negotiate low-interest rates and payments, and also the card issuer can bring your current accounts to a feasible debt restructuring plan.
4. Keep Your Revolving Account Balances Low
You may be far behind on your bill payments, but you cannot afford a huge balance on your revolving credit account, which can easily lead to a high credit utilization rate, hurting your credit score in the long run. You need to remember that the revolving accounts including lines of credit and credit cards, need to be kept within their respective credit limits for a low balance to be maintained, which keeps your score in a good range. This way, your credit utilization ratio will also be in the single digits, which is a good sign for your score.
5. Limit How Often You Apply for New Accounts
You can’t just keep opening different credit accounts, and forget about the older ones. There are various rules and regulations which limit how often to submit credit applications for building your credit file. With every application, you go through a series of inquiries, which also can hurt your credit scores a little, eventually adding a compounding effect on the credit portfolio. Also, opening new accounts decreases the average age of your accounts, leading to affecting your score.
Though the hard inquiries and average accounts age may be minor scoring factors, it is not wise to submit different credit applications for the same, with an exception of certain loans like mortgages, automobiles, etc. moreover, the risky behavior attached with the rate shopping can be ignored by the credit scoring models if they have occurred within a certain period of time or gap of weeks.
Calculating your credit score is not an easy task if you’re not aware of its tits-and-bits. With this article, you get a clear understanding of various factors which can help you improve your score, without hurting your payment cycle. Also, you must build this habit of checking your payment history and scheduling the payments in a sustainable manner.