Your credit score is essential; however, many people neglect to work on or even understand their credit. Lenders use it to approve or deny your loans and low credit scores mean you will pay higher interest. In a nutshell, your credit score is the public record of your financial reliability.
If you do not work on your credit score, you might spend thousands of dollars extra on your loans for cars, homes or businesses. It is not something to take lightly, but it cannot be fixed overnight either. Continue reading to learn more about improving your credit score and saving money on interest payments.
Make Payments on Time
A big part of your credit score has to do with payment history. May credit score compilers consider consistent payments the most important part of your credit score. So, to improve your credit score, you should make paying bills on time your highest priority. One good way to make your payments on time is to automate the process. Check your bank account and set your monthly payments to a number you can afford each month. You might consider using a credit card to pay for some of your monthly expenses. This can help your credit score immensely, but make sure you pay off the entire balance each month.
Get Your Free Credit Report
You can get a free credit report from the three major credit bureaus once per year. Checking your credit report will help you plan for improving your score. It includes everything that counts as a negative mark against you, which should not be ignored. Try to avoid hard inquiries, though, because these also count as negative marks. One good way to improve your credit score when you have little means is to get added to an account in good standing. This is a free and low-risk way to create a better picture for credit bureaus.
Improve Your Debt Ratio
The rule of thumb for credit utilization is 30 percent or less. If you have a lot of debt, this should be your first goal. One good way to work on your debt is through a consolidating loan. Research loans using resources like MaxLend reviews and compare your interest rates. Putting a large percentage of your debt into one loan can help reduce your monthly payments and free up your credit cards. Just paying off your credit cards with a loan can make your debt seem more manageable, even if you still owe the same amount.
Do Not Close Accounts
One mistake people make is closing their old accounts. This is a mistake because credit history is integral to your credit score. Keep accounts open even if you do not use them anymore. Open accounts with no balance are an excellent way to improve your credit ratio and boost your credit score by a few points.
There are a lot of ways to improve your credit report. Some methods do not require any payments or effort. Work on improving your credit ratio and making payments on time to build up your credit report and improve the interest rates you get on loans.
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