When you become financially independent, you'll notice the importance of having a good credit score. A good credit score allows you to have more financial freedom, hence why you always want to elevate your credit score.
Many financial institutions look into your credit score to see how responsible you are with your finances. The better your credit score, the easier it is to get approved when you apply for credit cards and personal or business loans.
If your credit score is currently suffering, here is an easy-to-follow improvement guide to elevate your credit score.
Why You Should Elevate Your Credit Score?
A higher credit score and a clean credit history are very advantageous positions, especially if you're looking to apply for a new credit card or a loan.
Many lenders and credit card issuers see you as a lower risk if you have a clean history and an excellent credit score.
You also have a better chance of getting approved for a credit card, loan, or mortgage. Applicants with good credit scores tend to have lower interest rates and better car insurance rates.
Lastly, lenders provide you with higher credit limits than other applicants when you can elevate your credit score.
Learn How Lenders Determine Your Approval
For many financial institutions, they rely on FICO scores to help you get approved for your credit card or loan application.
The score is determined by several factors, which include your payment history, credit usage or utilization, age of credit accounts, new credit inquiries, and credit mix.
This is why it is always important that you limit the usage of your current credit limit, and you should always pay your balance in full and on time.
Both play a huge role in determining your credit score.
Build Credit Early
As soon as you are eligible to have a credit score, make sure that you learn the habit of having a credit card to build credit early on.
This can be as early as your college years with student credit cards or right after graduation when you have your first job and have a secured credit card.
There are several credit-builder loans or secured credit cards that can help you build a good foundation for your credit score.
It also teaches you to become responsible with your finances and how to handle your credit card properly.
Always Pay Your Bills On Time
One of the best and most effective strategies to elevate your credit score is to pay your bills on time.
There is no other method that is far more efficient in improving your ailing credit score than simply paying your bill.
If you know you're going to miss a payment by more than 30 days, call the lender or creditor immediately and ask what you can do about it. Your record of paying your bills is the largest contributor to your credit score.
Late payments will stay on your credit report for around seven years, which is a long time for such an effect on your status.
Keep Old Accounts Open
Having an old account can be advantageous for you.
A lot of people tend to close old bank accounts or old credit card lines, but they don't know this can help elevate your credit score.
This often goes to show that you have a long credit history, and if you have been paying your bills diligently from the start, you just gained their trust in an instant.
Having a long-standing and mature account also lets you have better credit limit options.
Dispute Any Error on Your Credit Report
When you receive your credit report, make sure that you thoroughly check the statement.
You are entitled to receive free weekly reports from major credit bureaus.
Check for mistakes such as payments that were marked late but were truly not, or if you found any credit activity that is not yours that might affect your overall credit health.
Identifying the negative information on your credit report to be disputed and corrected can majorly impact and improve your overall credit score.
Ask For An Instant Score Boost
Experian offers an instant score boost when you show them that you have been financially responsible for the past few years.
This is why you must pay off your bills on time, even if your monthly streaming subscriptions are good enough to show that you have responsible financial behavior.
You will then receive a summary of your boosted data, which they will share with their partner lenders so you can apply for better financial products.
Always ask your lender or any financial institution if they have an instant score boost feature that you can avail of to help elevate your credit score.
Try to Avoid Moving Homes Frequently
While this can never be avoided due to different circumstances, moving around might make lenders think that you are not able to pay your rent or that you are having trouble paying it.
This kind of financial behavior can be quite suspicious, and it can lower your credit score. Notice that many lenders often require you to submit proof of address or a utility bill for the past few months.
This is why they want to know if you have been moving around frequently. If you have a home, try to settle in as much as possible, then apply for a better financial product before moving out.
This allows you to use your new credit card, pay off your bills, and have a new and better home.
Limit Credit Card Application
Each time you apply for a credit card within a short period, it can make lenders think that you are desperate to have a credit card or you're very reliant on credit cards.
It doesn't even matter what kind of credit card you're applying for.
Make sure that you pace your credit card applications properly and set it up about twice a year.
One early in the year and one in the middle of the year just to be safe, with 6 months in between.
Conclusion
Your credit score plays an important role in becoming a financially capable individual. If you have a good credit score, you have more opportunities to borrow money and gain access to a lot of financial products that are not available to many others. Make sure to apply the easy-to-follow improvement guide above to elevate your credit score for the better.
