Credit scores are a crucial factor that lenders and other financial institutions use to determine creditworthiness. When planning to buy a home or a vehicle, or applying for a credit card, a higher credit score often secures better terms and interest rates. For those aiming to improve their credit score, here are some tips.
First time homebuyers should start by obtaining a copy of their credit report from each of the three major credit bureaus: Equifax, Experian, and TransUnion. Each individual is entitled to one free copy from each bureau annually. Reports should be reviewed for any errors, inaccuracies, or unauthorized accounts. Disputing and correcting errors can potentially give the score a quick boost.
Consistently paying bills on time is one of the most significant factors that contribute to an individual’s credit score. Set up reminders or automatic payments to ensure due dates are never missed. Late payments can have a negative impact on a score, so make punctual payments a top priority.
A high credit card balance relative to its credit limit can negatively affect the credit utilization ratio. Aim to keep credit utilization below 30% of a credit limit. If possible, work on paying down credit card balances to improve the score over time.
When applying for credit, a hard inquiry is usually recorded on the credit report. Too many inquiries within a short period can lower the score. Be strategic about applying for new credit accounts and only open those that are genuinely needed.
The length of credit history matters. Even if a credit card or account is not frequently used, keeping it open can help increase the average age of credit accounts, which is a positive factor for the overall credit score.
If there is a history of missed payments, focus should be on building a positive payment history moving forward. Over time, consistent on-time payments will outweigh the impact of past delinquencies.
Responsible credit use involves borrowing only what you can afford to repay. Avoid maxing out credit cards or taking on too much debt, as it can lead to financial strain and negatively impact credit scores.
Improving a credit score takes time and consistent effort. With responsible financial habits and a bit of patience, individuals can gradually boost their credit score and enjoy the benefits of improved financial opportunities.
If you would like a quick check on your eligibility for Ownify, use our tool here.