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One of the most important measures when it comes to financial health is credit scores. With it, you can get approved for new loans, get credit cards, mortgages, and more.
The better your score, the easier it will be for you to be approved for any of the above. That is why it is so important to improve your credit score, this way it will be even easier to achieve your goals
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The higher your credit score, the more confidence you show to creditors, as it demonstrates that you are someone who is responsible with your finances.
In this sense, it takes little time to extract a lot of information on your credit reports. So, if you have goals of getting a loan or financing, and want to improve your credit score as soon as possible, keep reading this article.
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How can I improve my credit score?
According to the FICO model, an ideal credit score would be 850 points. But if you don’t have this score, there are ways to improve it.
A good credit score allows for lower interest rates as well as better benefits, such as higher credit card limits and better loan terms.
On the other hand, a bad credit score can hurt you when it comes time to rent a car or a house, or when it comes time to get insurance.
In this sense, we will show you 8 important tips to improve your credit score and that can be very useful to achieve your financial goals.
It is worth pointing out that although some changes may contribute in a short time to improve your credit score, some of them will only be possible after a period of implemented changes.
However, with patience and effort it is possible to acquire new financial habits and improve your credit situation.
Check out 8 ways to improve your credit score below:
1- Pay your bills on time
One of the oldest strategies, yet one of the most effective, is to pay your debts without delay. The vast majority of lenders use FICO scores to make their decisions.
Of the five factors they use to make loans and other loans available, payment history comes first, with a 35% impact on your credit score.
Paying your debts responsibly is a great way to have a good payment history. You can use different strategies to do this, such as scheduling your bills to be paid on automatic debit, creating a filing system to keep track of your bills each month, or creating alerts on your cell phone to reinforce the due dates.
2- Watch out for overdue accounts
A late payment can remain on your credit report for years, so it is important to keep your payments on time. However, if you have delinquencies with any institution, it is of utmost importance to seek measures to resolve them as soon as possible.
Delinquent accounts can have a very high impact on your credit score, so if you are looking to improve your credit score it is essential to schedule and make a plan to pay off all late or missed payments and thus improve your payment history.
3- Follow your progress with a credit monitor
Credit monitoring services are essential in the life of anyone looking to improve their credit scores, where you can monitor your credit score and analyze how it changes over time. Most of these services are free and can be crucial in tracking how close you are to your ideal score.
Some credit monitoring services also have an anti-fraud notification system, so if there is a new credit card account on your credit file, or in any application, you will be notified and can protect your credit score from fraudulent activity.
4- Use a secured credit card
A secured credit card can help you improve your credit score. By making a cash deposit, by paying in advance you can use that amount as your card limit. By using the card, you are increasing your credit score by making payments on time.
It is important to choose a credit card that is secure, and that reports its credit activity to all three major credit bureaus.
You can also redeem the amount added as a limit if you need it, or use it as payment, which helps you maintain a more positive payment history.
5- Ask for higher credit limits
One of the fastest strategies to improve your credit score is to ask for higher credit limits. This strategy has a high impact, since using your credit card frequently increases your score.
If your balance stays the same, and your credit limit increases, this will be positive for your credit history.
It is worth noting that when you contact your credit card issuer and ask about the limit, you should be aware of your situation with banks and creditors, since asking for credit inquiries that are incompatible with your situation, such as asking for too high limits when you have a very low score with many defaults, can have a reverse effect and temporarily lower your score by a few points.
6- Use 30% credit or less
As the second most important factor in your payment history, using less than the full credit card limit is also a very effective way to improve your credit score.
In addition to reducing your spending, keeping credit utilization at a rate of 30% or less aligns with a request for an increase in your credit card limit if it pertains to your situation, as mentioned in the previous topic.
On some credit cards, you can use an alert feature to be notified whenever your balance is too high, and when new charges are being added beyond the card’s optimal usage rate. So if you have this feature on your credit card, don’t hesitate to use it to increase your score.
7- Decrease the frequency with which you request new accounts
A very common mistake that many people who want a higher credit score make is to keep applying for new credit card accounts.
By applying for new accounts, you will be performing Hard inquiries, which can hurt your score and end up taking you in another direction when we talk about raising your credit score.
When applying for a mortgage, or new credit cards, the bank may understand that you are facing financial problems and may be a risky customer for the lenders.
So if you want to improve your credit score take a closer look before you apply for new accounts.
8- Keep old accounts open
Keeping old accounts open is a great tip when we talk about credit scores. When you keep old accounts open, you maintain the length of your credit history, even if you no longer use them.
The older your credit account is, the better it will be viewed by creditors. By closing your old accounts, you will have less credit available.
In that sense, since the ideal credit rate is to use 30% or less of the total amount, decreasing your total credit amount will cause you to use a higher percentage of the available credit amount, which will hurt your credit score. So, if you want to improve your credit score, don’t close old accounts.
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