Maybe you have applied for a loan before and were either not approved or received a high interest rate. The reason for that was because of your low credit score. Whether we agree with this system or not, we have to learn it and play that game if we want to ask for a loan.
So how do you your credit score higher and assure yourself of getting a good interest rate? Follow these 5 tips and you’ll will begin to rise in the near future:
1. Pay your bills on time.
That’s the simplest way to improve your credit score. Set up automatic payments if you have to, but make sure every bill is paid on time. Many bills, like mobile phone service, won’t report that you’re paying on time, but the moment your account goes to collections, you can be sure that it will hit your credit rating.
2. Don’t open new accounts.
New accounts are red flags for companies looking to extend you credit, like an auto loan. The more credit cards you have, the more trouble you can get into. Also, those new accounts put inquiries on your credit record, which can indicate you’re looking to do some serious spending. Of course, if you’re shopping around for an , a few inquiries are normal.
3. Keep your credit to available credit ratio low.
Sometimes credit is a necessary evil, but don’t run it up any higher than you absolutely have to. If you have $2000 in credit card debt, and $10,000 in available total credit, your ratio is 20%. However, if you have $2000 in credit card debt and only $5000 in available total credit, your ratio is now 40%, and that hurts your score.
4. Don’t close your accounts.
Unless you have had problems with the credit card company, leave those cards with 0 balances open. You don’t have to use them, but if you carry a balance anywhere else, those open cards help your credit to available credit ratio. One of the exceptions to this is if the card has an annual fee. If you have a 0 balance, you might close it, just to save yourself the cost.
5. Consolidate your debt if it’s in your favor.
Many credit cards are looking for your business, and they often offer up 0% interest for 1-2 years when you use the balance transfer. If you’re struggling trying to juggle multiple payments, or you know you can pay off the balance, if you didn’t have to worry about the interest, then look into a credit card offering balance transfers. Your score might take a brief hit with the new card, but in the long run, paying off a card is better than missing payments.