Don’t sit back and mull over your low Credit Score. Here are 2 simple ways in which you can boost your score in 2019.
Your Credit Score is an indicator of whether a prospective lender can trust you with credit. Your score acts as a decision-making factor for lenders while determining whether they are going to extend credit to you.
Undeniably, your past financial behaviour has a major impact on your score. But that is not to say that your financial past will be the sole determinant of your score.
Additional Reading: How To Track Your Credit Score Like A Pro
A good score is your gateway to an easy access to better Credit Cards and loan rates, as well as lower security deposits and insurance rates.
If your Credit Score is down in the dumps, don’t panic. Start by examining your credit report closely. Identify missed payments, debts, and other payment lapses that are detrimental to your score. Work on improving these habits and you are sure to get a whopping score!
Additional Reading: The Importance And Benefits Of A Good Credit Score
Because it is a 3-digit summary of your financial history, understanding how your score is calculated is the first step to improving it. Let’s take a look at the components of your Credit Score.
- Payment history – 35%
- Total amounts owed – 30%
- Length of your credit history – 15%
- Application for new credit – 10%
- Type of credit in use – 10%
Additional Reading: What Are The Components Of Your Credit Score?
It’s quite clear that your payment history and the total amounts owed have the highest contribution to your score. Zeroing in on these areas and establishing a certain degree of financial discipline is a sure recipe for getting your wounded score back on track. Here are two simple ways in which you can do it.
1# Be consistent with your payments
- Be sure to take care of your payment history as it comprises a major chunk of your Credit Score. You can also consider setting up automatic payments from your checking account.
- Missing a payment deadline may seem quite harmless but it has grave consequences. Details of missed payments remain in your credit history for many years and are nothing short of ghosts back from the grave.
- Simply paying your Credit Card dues on time and in full will give you a good start on the road to credit awesomeness! Apart from your Credit Card dues, the way you manage your rent, utilities, and other bills also impacts your score.
2# Steer clear of the debt monster
- Are you aware of the term ‘debt-to-income ratio’? It is the amount of debt you have versus the income you make. The higher the ratio, the lower will be your score. Do you have a huge debt-to-income ratio, it’s time for you to pull up your socks and pay off your debts.
- Bringing down your debt-to-income ratio will not only boost your Credit Score, but it will also be useful the next time you apply for a Home Loan or a Car Loan.
- One of the sure-fire ways to be well-ahead of your debt is to keep your balances low. As much as possible, try maintaining your credit utilisation rate below 30%. For those who are wondering what the utilisation rate is, it represents your balances in relation to your credit.
- Watch out for poor credit habits such as defaulting on payments, applying for credit to multiple lenders within a short span of time, and spending more than 50%-60% of your credit limit regularly.
- Remember to pay off any outstanding dues before applying for new credit.
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If you are not sure about where to start, begin by checking your Experian Credit Score for free!
Now that you have these tips at your disposal, we wish you the best on your journey to achieving a roaring score in 2019.
Additional Reading: How to Build a Credit History If You Don’t Have Any Existing Loans
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