4 Simple Steps to Improve Your Credit Score
Are you looking to invest in a new car, a piece of land or new business?
You can see it now. The purchase you have always dreamed of making. It’s within touching distance.
The only problem? Your credit score is in bad shape and it isn’t likely that you will be approved for the loan you need.
Whether it be your first home, a new car or that business you have dreamt of owning since you were a kid, sometimes we need help from financial institutions to reach our goals. Having a poor credit rating can prevent these institutions from trusting you to repay them though, and can lead to the rejection of your applications for credit and loans.
Luckily, with some careful planning, discipline, and these 4 simple steps it is possible to fix your credit score.
Pay All Your Bills On Time
The most important way to ensure that your credit score doesn’t get even worse going forward is making sure you pay your bills on time.
This is especially important for bills over $150. If bills over this amount are unpaid for over 60 days, it is considered a default on your credit card and can have a significant impact on your rating.
If you are worried that you are going to default on a payment, get ahead and make sure you set up a payment plan with your account provider to avoid a black mark against your name.
According to the bookkeeping experts at Metro Bookkeeping, planning ahead can help you avoid nasty headaches down the line, saying “the simplest way to stay on top of your credit is to charge only what you can afford. Spending within your means is a skill you can learn over time, and it starts by staying inside the spending limit of your capital.”
Bring It All Together
It may be advantageous to evaluate your credit accounts and bring them all together under one product.
Consolidating your credit will make it easier for you to track and manage your debt by keeping it all in one place.
According to the architectural team at Modern Day Concepts, it pays to do your homework, particularly if your business relies on cash flow or operates with lengthy projects like they do, as they noted “do your research when choosing a credit card or loan product that you will be consolidating under and find one with low interest rates and that suits your needs. This is especially effective when your influx of capital occurs across a longer time frame.”
When debt consolidation rolls high-interest accounts into a unified lower-interest payment you’ll feel less pressure to maintain payments that only hit your minimum threshold and aren’t actually moving you away from debt.
Look Into Improving Your Debt-to-Credit Ratio
Your debt-to-credit ratio refers to the ratio between the amount of money you use on your credit account and the limit to which you can borrow.
The lower the ratio, the better for your credit score. Therefore, it may be beneficial if you increase your credit limit as to reduce your ratio. Of course, only do this if you can trust yourself not to be tempted into spending more. Try to aim for below 10% if you can, but anything below 30% will be beneficial to maintaining a strong score.
According to the financial experts at Empowered Finance, “any debt-to-credit ratio above 30% could stop you from securing the finance you need. By focusing responsibly on the debt you have you’ll be able to move towards a better score. Try creating a debt reduction plan to identify where you can save money upfront to divert to your larger debts.”
Reduce Your Debt
Rather than just paying off the interest each month, try and pay as much as you can afford towards your debt repayments. Any bit extra that you can pay is good for your score as it shows you are making an effort to reduce your debt.
Once you have paid off your debt, put in strategies to prevent yourself from falling behind again. If you can, make sure to pay off your entire credit balance each month as to avoid incurring interest.
A Sydney-based university student, Ryan Smith is also a freelance writer. Ryan is a business student and is passionate about learning new things. You will see Ryan in a coffee shop enjoying his alone time when he is not on his desk.