A credit score is a precise measurement of an individual’s creditworthiness. In simpler terms, it’s a three-digit number used by money lenders to determine how likely borrowers are to repay their loans on time. People with higher credit scores are more likely to qualify for high-limit credit cards and favourable loans than individuals with poor scores. Maintaining a high credit score requires immense financial discipline. For instance, you ought to pay back all your loans on time.
Repaying the full loan amount is essential if you desire to maintain an impeccable credit score. If you currently have a poor score, all is not lost – it’s still possible to improve your dwindling score.
Here are 4 ways you could improve your credit score:
- Query any irregularities within your credit report
Whenever you notice some inaccuracies within your personal credit report, it’s important to check with one of the three credit bureaus. According to Simon Sule, the Managing Director and Founder of Credit Cards Comparison NZ, query any inconsistencies in your credit report. Credit bureaus are required by law to investigate errors brought to their attention. This means if the creditor fails to respond to a request from the credit bureau within a reasonable time the item will be removed from your record.
- Pay your bills and loans in time
Creditors play such an important role in society, particularly because they promote money circulation and foster development both at a personal and business level. But for their immense generosity, they require one thing in return: that borrowers stick to the agreed terms and conditions of their loan. Repaying your loans on time helps to boost your credit score significantly. Rather than abandoning your previous loans, it’s important to make partial payments until they’re all cleared. Bad credit scores are not permanent. You can improve them by paying bills before the deadline arrives and avoiding missed payments.
- Reduce your overall debt
Too much debt is bad for a variety of reasons. First, it puts you at loggerheads with your creditors. Your credit score also starts dropping gradually once you fail you pay off your debt on time. To improve this score, it’s vital to clear your debt completely instead of postponing payment. In fact, paying off your outstanding debt is the most effective method of strengthening your credit score. Some individuals love getting new credit cards in an attempt to raise their available credit and pay off older debts. Avoid this approach at all costs. It could easily backfire and worsen your credit score.
- Keep your credit card balance low
You ought to maintain a low credit utilisation ratio. This ratio generally proves that you’re a good credit manager and that you don’t let your credit cards max out. It’s best to preserve a 30% or less credit utilisation ratio. But how can this be achieved? Apart from adapting a strict financial discipline, you also need to reduce your credit card balance and keep it low. Rebuilding your credit score is a lengthy process that could take upwards of seven years. However, this time-length will also depend on what caused the negative change in the first place.
You can improve your credit score by adapting these few effective strategies.