9 Quick and Easy Ways to Improve Your Credit Score

9 Quick and Easy Ways to Improve Your Credit Score

If you want a loan of any kind or are just looking to rent out a place, your credit score needs to be in good shape for you to get approved. You can easily improve your credit score from none/poor to excellent with determination, time, and a few easy tricks. 

1. Use a Secured Credit Card

If you’re new to the credit building process and need to establish credit or have a bad credit score, you need to start off with a secured credit card. A secured credit card asks you to put money upfront for the same amount of credit you want to receive so that the credit card issuer can be secured if you default on payments. Further, a secured credit card is your golden ticket to showing lenders that you’re worthy of their loans and agreements as it can help you raise your credit score. Traditional credit cards will not be awarded to someone who has no prior credit history but secured credit cards easily approve people with no credit experience. Secured credit cards look, feel, and can have most of the same benefits as a normal credit card.

2. Don’t Cancel Unused Credit Cards

Unless your credit card is charging you an unbearable annual fee or your credit card is new, it’s best to keep it open. Firstly, closing unused credit cards will result in your credit utilization rate rising, resulting in a damaged credit score. Credit utilization rate is used by credit-scoring agencies to assess how much you’re spending in credit compared to how the total amount of credit allotted to you. With credit utilization rates higher than 30%, your credit score is more likely to drop. By canceling out a credit card, you risk having more debt compared to what is being lent to you, and so the utilization rate will rise as a result. For example, if you own a total of two credit cards each with $2,000 in credit limit, you have a total $4,000 credit limit. If you only use one credit card and reach $1,000 in spending, your credit utilization rate will be $1,000/$4,000 or 25%. However, if you close the unused credit card, you now have a utilization rate of $1,000/$2,000 or 50%. It can be wiser to keep an unused credit card than canceling it as you can stay under the recommended 30% credit utilization rate. 

Many credit-scoring agencies calculate credit scores based on how long you have been using credit accounts. The average age of your credit accounts is taken into consideration when calculating your credit rating, and so by canceling your unused credit cards you’re only shortening the time you’ve been using credit for. While other types of credit accounts such as loans are taken into account in this calculation, it’s wiser to secure your efforts on all fronts. 

3. Avoid Spending Greatly on Your Credit Cards

Contrary to popular advice, you should limit how much you spend on your credit card. Don’t seek to max your credit limit at the end of each month, instead purchase only what is needed. By spending more than what is needed, you risk a high credit utilization rate which can be detrimental to your credit score. If possible, make transactions in cash or methods other than your credit card when you spend 30% of the credit limit allowed. For example, if you have a credit card that has a $1,000 credit limit, try to only spend $300 on that credit card and make all other transactions via other methods. While 30% may seem like a small amount, the lower you spend on your card the higher your credit score becomes.  

4. Pay Bills and Debts on Time and in the Decided Amount

Additionally, you need to pay bills and debt payments on time and in the allowed amount. Your credit score is largely dependent on how well you’re able to pay back, and so carrying out such practice shows that you are creditworthy. This means defaulting on payments, paying less than what is requested, or making late payments, all work against your credit score. This also means that you should seek to limit expenses that you can’t commit to as they will only burden your credit deservingness to finance other purchases. You can be easily reminded of when to make payments through simple mobile applications and tools that notify you.

5. Look to Transfer or Refinance Existing Debts

Being unable to pay off debts due to high-interest payments, can really chip away at your credit score. However, by seeking to refinance your loans you can enjoy lower monthly payments that you can pay off and thus enjoy a stronger credit score. Many mortgage lenders allow borrowers to refinance their loans at a lower interest rate after their seasoning period or the time where you can not refinance a loan. Ask your mortgage lender when your seasoning period ends and shop around for the lowest and most suitable interest rate that you believe you would be able to handle. However, it may be wiser to stick with your current interest rate depending on the additional refinancing costs and the length of the loan.

You can also switch to lower interest rates by taking advantage of the balance transfer rates that many credit cards offer. A large selection of credit cards offer 0% intro APR, allowing you to easily repay your commitments while increasing your credit score in the process. 

Don’t let heavy interest payments get the best of you, as many methods like refinancing and balance transfers can help lower payments. Timing and the amount paid back are keys to a good credit score, so consider seeking a lower interest rate for your debts as it can only benefit you. 

6. Think Twice Before Applying for Loans and Credit Cards

Every time a hard inquiry such as a credit card or personal loan application is processed, your credit score drops up to 5 points or more. While this damage is temporary and may be necessary to achieve certain goals, you should always consider the downside before making hard pulls. To decide whether or not your application is going to lower your credit score, see the following: link to hard pull vs soft pull. Further, all the credit applications that you submit will show up on your credit history and so you may seem as irresponsible when you submit multiple applications. 

7. Dispute Any Wrongful Credit Checks 

Requesting your credit report is easy and free from the three major credit reporting bureaus: Equifax, Experian, and TransUnion. Each credit agency has its own credit reports and so you may find discrepancies between the three. You should routinely check your credit reports to ensure that no fraudulent activity is occurring and ruining your credit rating. If you notice any unauthorized credit checks, immediately correct it with the respective credit agency.

8. Become an Authorized User 

When you become an authorized user on the credit card of a person who has a great credit score, you become eligible to take benefit of their credit rating. You don’t have to necessarily spend on the authorized credit card to be able to enjoy the great credit rating of that person. Your credit score will improve by no added effort, a very easy-to-implement tactic.

9. Actively Monitor Your Credit Building Progress

All your efforts of building your credit score will be worthless if you don’t actively monitor your credit score. By monitoring your credit score, you can take action on discrepancies that may arise such as fraudulent activity that seeks to disrupt your credit rating. Further, you would become aware of how much further effort is required to reach your credit goals. You can properly plan out what you need to do and how to solve challenges in your credit score when you routinely check what your credit score is. Additionally, by keeping sight of your credit score you’ll be able to enjoy a rewarding experience. A sense of self-pride will emerge as you notice your credit score slowly increasing, creating a positive feedback loop to help you be determined in the process.