How To improve Your Credit Score
Your credit score is a three-digit number that can have a major effect on your financial future. When you apply for a loan, your credit score is checked. Your credit score will also be checked when you apply for a mortgage. A bad credit score can hinder you in many ways. The good news is that bad scores can be improved. Below is the guide on how to improve your credit score:
Check Your Credit Report
The first thing that you should do is check your credit report. In some cases, people have bad credit due to an error on their report. It is estimated that 25 percent of credit reports have an error on them. Make sure that you contact the credit bureaus if you notice an error.
Pay Bills On Time
One of the main reasons that many people have a low credit score is because of late payments. Even if you are only 30 days behind on a payment, it can still have a negative effect on your credit score. That is why you should try your best to pay your bills on time.
Talk to your creditors if you have already fallen behind on your payments. You can also speak to a credit counselor. You can improve your credit score by getting back on track with your payments.
Keep in mind that if you have a collection account, then paying it off will not remove it. Collections accounts will likely stay on your credit report for five years. However, it will show that you have paid it off on your credit report.
Keep Credit Card Balances Low
Credit cards can have a positive or negative effect on your score. When you use them responsibly, they can help you build and improve your credit score. On the other hand, your score can drastically decrease by misusing them.
Try to avoid getting into the habit of using your credit card to make large purchases. If possible, you should pay off your credit card every month. Your credit card balance is one of the factors that affect your score. Paying your credit card off every month shows that you are financially responsible. You can also avoid high interest rates by paying your credit card off every month.
Avoid applying for a new credit card unless you need one. Applying for multiple credit cards at one time can lower your score.