Your credit score is an important figure. It’s perhaps one of the most important numbers you’ll ever need. If your credit score isn’t great you could get declined on loans and mortgages. This setback in your financial journey could be detrimental to your life.
But if you’re trying to establish credit, fear not, there are ways of improving your ratings. So, how do you get strong credit?
In this article, we’ll share seven credit tips for improving your score.
What Is Good Credit?
Before we look at ways to build strong credit, we first need to answer the question ‘what is good credit?’
Credit scores range from 300 to 850. Scores of between 670 and 739 are considered good; while 740 to 799 are considered very good and anything over this is excellent.
Check your credit score regularly to find out how you’re faring.
1. Only Use a Small Amount of Your Available Credit
If you max out your credit cards, or even come close to using the entire balance, it could look irresponsible to lenders. Especially if you don’t plan on repaying the entire balance of the card off within the month.
Lenders know that borrowers that use the entire balance on their cards will often have problems repaying everything that they’ve borrowed.
Your credit score will suffer if you run up a large balance on your credit card and don’t pay it off. Instead of living close to your limit, keep your balance at a small percentage in comparison to your credit limit. This will help you to build strong credit.
2. Only Borrow What Money You Can Afford to Pay Back
A credit card isn’t there for you to simply buy things that you cannot afford. If you use your card in this manner you will very quickly land yourself in debt and credit trouble.
One of the best ways to build strong credit is to get into the habit of only charging what you can afford to repay to your credit card. By doing this, you’ll be showing lenders and creditors that you’re a responsible borrower.
If you’re in the habit of doing this, you’ll find it much easier to borrow money and get new sources of credit when you show that you’ve got the discipline to borrow what you can actually afford to repay.
Not only will this help with your credit score, but it will also help prevent you from slipping into excessive debt.
The same rule also applies to loans. Regardless of whether the lender says that you qualify more money than you need, you should only borrow what you can afford to repay.
When shopping for a loan, go over your budget and work out what you can afford in terms of a monthly payment. Ensure that your loan payment isn’t unaffordable.
3. Pay Your Bills on Time
It’s important to remember that not all of your monthly payments will appear on your credit report. There are bills that won’t get reported to credit bureaus unless they become delinquent and the account is sent to a collection agency.
You can stop negative accounts from getting added to your credit report by paying your bills on time. Doing this will help prevent delinquency and build strong credit.
4. Pay Your Credit Card Balance In Full
As previously mentioned, you should always pay your credit card balance in full. Again, if you’re only charging whatever you can actually afford to pay, then repaying your credit card won’t be an issue.
A large part of your credit score will be based on whether you can make your payments on time, it’s therefore in your best interests to clear your balance each month.
5. Let Your Accounts Age
When you’ve had credit for a long time, it’s better for your credit score. Keep your oldest accounts open. These will help increase the age of your credit and help you build a better score.
While closing an old account won’t immediately remove it from your credit report, they will eventually get dropped from your credit report,
6. Dispute Errors on Your Credit History Report
Any mistakes on your credit file could end up affecting your score. Getting these fixed will help you improve your score quickly.
You can get your credit report from Experian, Equifax, or TransUnion. Check them often to look for any errors, and then dispute them to have them removed.
7. Mix It Up
If you currently only have one type of credit open, think about getting types of credit that you don’t have. For instance, you may just have credit cards but no loans. Consider taking out a loan next or vice versa.
Taking out alternative lines of credit will improve your credit mix. If you have installment accounts and revolving credit mixed on your credit file, this can improve your chances of getting credit.
How to Build Strong Credit
There are many great ways to build strong credit. Paying off your credit card in full each month will be a massive leap in the right direction. Get out of the mindset that credit is there to be used to the fullest. Keep the majority of your credit limit unused.
Check out your credit score and challenge anything that doesn’t look right. And, finally, let your accounts grow old.
Building strong credit takes time and patience. It is entirely possible that you could turn your fortunes around though with the right attitude and perseverance.
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