How to Improve Your Credit Score
Having a high credit score is an asset when trying to take out a loan or apply for a credit card. Lenders use your credit score to determine whether you are financially responsible enough to make payments in a timely manner, and ultimately pay back all your debt. Improving your credit score may take time; however, it will pay off in the long run if you decide to take on large financial commitments, such as buying a house or a car.
There are several steps you can take to build your credit score fast. Firstly, check your score online to see what factors are affecting your credit. By identifying the problem, you will know what changes need to be made for the future. Once you make the appropriate changes, it will take some time for creditors to adjust your score.
Here are a few credit-building tips to improve your credit score over time:
1. Pay Your Bills on Time
Lenders review your credit score to see if you are eligible for a loan. If you are responsible and make your payments on time, your credit score will increase over time. This includes car payments, student loans, and any major credit card debt you may have.
2. Pay off Your Debt
Avoid debt as much as possible and be sure to pay it off sooner rather than later. Debt collects interest over time, which prolongs the repayment process and can negatively affect your score.
3. Open New Credit Card Accounts only if Necessary
Keeping credit card accounts open -- even if you don’t use them -- can improve your credit score over time. However, only open a new credit card account if necessary. Otherwise, you may risk damaging your credit.
4. Don’t Close Unused Credit Cards
As stated earlier, even if you don’t use your credit cards, keeping them open is an easy and harmless way to improve your credit score. However, be sure they do not cost you money in annual fees before you decide to leave them open.
5. Dispute any Inaccuracies on Your Credit Reports
Check your credit reports frequently for any incorrect data that may be reported by creditors. Identity theft is also common and can be avoided by regularly monitoring your credit reports.
How Long Does It Take to Improve Your Credit Score?
Unfortunately, bad credit cannot be fixed immediately. If you have several late payments or inquiries on your account, you will need to make your payments and slowly rebuild it again over time. A few factors that negatively impact your credit score include:
- Delinquencies, such as nonpayment on a cash advance, will remain on your credit report for seven years.
- Inquiries on your account remain for two years on your credit report.
- Public record items remain on your credit report for seven years. However, some bankruptcies may remain for about ten years.
Monitoring your credit score and making the correct changes to your spending habits will improve your credit over time and make you look more appealing to creditors and lenders.
How to Start Building Credit at 18
Building credit from a young age is vital to having a robust financial reputation in the future. A strong credit score means lower interest rates on credit cards, car loans, and mortgages. Here are a few steps you can take to begin building credit once you turn eighteen.
Learn the Fundamentals of Credit
Before you begin to build your credit, you should understand what credit is and how it is used. Your credit score is calculated by credit bureaus such as TransUnion, Equifax, and Experian, and contains information about your payment history, debt, and other financial data. This information determines your credit score. The higher your credit score, the more appealing you look to lenders and creditors. Factors that impact your score include the age of your accounts, your payment history, and new credit. Learning the basics about credit will prepare you for the future and prevent major financial mishaps. Improving your score can help you avoid high-interest loans – like bad credit payday loans – in the future.
Become an Authorized User
If a friend or family member is willing to help you build credit, they can make you an authorized user on their account. You may not even need to use their card; simply having your name on their account can boost your score. There are a few things to consider if you choose to become an authorized user. If you or the primary cardholder are not making payments on time or are racking up debt, this may damage both your credit scores over time. Also, be sure to check if the credit card company you are using reports activity for authorized users. Otherwise, your credit won’t see a difference.
Make Payments on Time
Keeping track of your payments and having a good payment history may significantly increase your credit score. This does not only apply to credit card bills but also phone bills, utilities, subscriptions, payday loans online for the self-employed, or other accounts you may have. Having a late or missed payment can severely impact your credit score.
Apply for a Starter Credit Card
If you don’t have a credit history, it may be challenging to qualify for a credit card. Applying for a starter credit card is a smart way to develop credit at a young age. A few options to look into are secured and unsecured credit cards and student credit cards.
Keep Your Credit Card Balance Low
Maintaining a low credit card balance is crucial to establishing credit. Your credit utilization score factors into your credit score, so it is important to keep your balance low and avoid incurring debt.
Monitor Your Credit Score
As you start to build your credit, you should actively monitor your credit score to see what is affecting it in the long run. It is also good to monitor your score for any inaccurate data recorded or identity theft.
Apply for a (Small) Loan
If you cannot afford it, it is not a good idea to take out a loan. However, if you have a pressing financial situation and need extra money to cover payments, a payday loan online for the unemployed can help you build credit. Of course, credit only builds if you make the loan payments on time every month. Be sure to keep track of your bills and pay off the loan fully in order to improve your credit score.
How to Build Your Credit Score Fast
Unfortunately, it takes time to build credit. By being responsible and staying on top of monthly payments, you can increase your credit score significantly over time. Closing off debts and keeping track of your credit score will also help in the long run.
Does paying off collections improve credit score? Paying off an account in collections won’t remove the negative mark on your credit report. It will show that it has been paid; however, it won’t disappear from your credit report and may stay there for about seven years.
How to Build Credit with No Credit
Applying for a starter credit card can help you build credit if you are young and just beginning to establish credit. Paying off the debt you already have, such as student debt or a payday loan with no bank account, can also help you build credit. Having someone cosign on a credit card with you or adding you as an authorized user on their credit card account is another option when you have no credit history.
There are several ways to increase your credit score and become more financially stable. Understanding the basics of credit and how it can affect your finances is just the beginning. Maintaining good spending habits and being thoughtful with your expenses will benefit you and your credit score in the long run.
You may be interested in these blogs, too:
