Having a good credit score is important because it qualifies you for good interest rates and loans so you can make large purchases comfortably. If your credit score is on the lower end, you may only be able to get loans with high interest rates or you may not qualify at all. The good news is that it is possible to raise your credit score if you implement these four strategies.
Obtain a Car Loan
It may seem counterproductive to improve your credit score by incurring additional debt, but one of the easiest ways to raise your score is to build credit with an auto loan. Although each new loan affects your credit score, so does each payment. Establishing a solid credit history by making timely payments raises your score and proves you can be responsible with large loan amounts.
Pay Down Debt
One of the largest factors in determining your credit score is your credit utilization ratio. This number references the amount of debt you have in proportion to the sum of your lines of credit. The less debt you have, the better your credit score will be so it is a good idea to focus on paying down debt as much as possible. This can be accomplished more easily if you refrain from making additional charges and pay more than the minimum amount due when your bill comes.
If you only make the minimum payment each month, it will take much longer to pay off your debt. You will also end up paying significantly more in interest. If you pay extra each month, you can drastically reduce the time it takes to pay off your card and save money on interest. Even paying just a few dollars extra could be beneficial, and the more you can pay each month, the faster you can pay off debt and improve your credit utilization rate.
Keep Unused Credit Card Accounts Open
Once you have paid off certain credit cards, you may be tempted to close the accounts so you can avoid racking them up again. However, because credit companies look at your credit history in addition to your score, it is a better idea to keep the lines of credit open. Having no balance on multiple cards has a great benefit on your credit utilization rate and also helps establish a solid financial history so creditors are more willing to offer you loans. If you close the accounts, you will not be able to prove your long financial history, putting you at a disadvantage when it comes to improving your credit score.
Monitor Your Credit Score
Checking your credit score periodically and monitoring your monthly credit card statements closely is the best way to improve your score while watching for fraudulent activity. Once fraudulent charges have been made, it can be difficult to prove you did not make them, and if the amount charged was substantial, your credit score could take a drastic hit.
Keeping your credit cards in a safe location often helps avoid fraudulent charges, but with technological advances being made every day, scammers are finding new ways to steal your information. The best way to ensure you are protected is by noting the charges you make each month and comparing them to your credit card statement. Being diligent with this strategy not only helps you catch fraudulent activity quickly, but it also helps you see how far you have come in improving your credit score.
Raising your credit score seems like a daunting task and it cannot be accomplished in one night. However, you can easily improve your score over time if you take these four strategies to heart and implement them into your daily life.