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Tips on how to improve your credit score

Tips on how to improve your credit score

Tuesday 05, 11 2019
Credit score is key factor allowing lenders or creditors to determine if they should lend you money, and there are some tips which can be used to raise it
Credit score is key factor allowing lenders or creditors to decide whether to extend you a loan or line of credit, since they don’t know you personally and have to base on their review of your previous payment history and other related factors. 
It is usual for your credit score to range between 850 and 300 based on your credit history. If you have a 750 or above score that means your credit is excellent, but you will be marked with a poor credit risk if your score is 600 or below. 
Just in case your credit score falls short to your expectation, you can still make use of some methods to raise it. By carrying out these actions, you will earn some benefits including lower interest rates on loans and higher limits on credit card. 

1. Don’t be late on paying your bill. 

One of the gravest mistake you can make that may leave serious impacts on your credit is failing to pay your bill on time, since it is common for lenders or creditors to review your payment history as one of the primary categories when determining your credit score. 
Even if you are late for a few days on paying your bill, it can still leave tremendous negative impact on your score, thus making it important to create some kinds of reminder to remind yourself when your bills are due. This is not a difficult task, since nowadays, every phone or computer has some kind of apps which you can use for this particular purpose. 

2. Work on paying off debt (Instead of moving it around)

Another vital factor in determining your credit score is how much your debt worth compared to the amount of total credit available, which is known as your open credit utilization rate. 
It’s best for you not to be at or near the overall credit limit on your card(s), since the utilization indicates the amount of your available credit that you’re using, including the percentage of each card, and the percentage of total available credit, and this is what lenders and creditors pay attention to. If your utilization rate are high, then averagely you are less likely to pay your lenders the money that you owe, and vice versa. 
And it’d be wise of you to start paying these loans if you want your credit score to improve. For example, if you borrowed 2 billion VND to purchase a house, and have paid around 40-50% of that amount, lenders and creditors will consider you being able to manage and repay your debt, thus raising your credit score. 

3. Review your credit report to look for, and remove, incorrect information. 

One of the most important things that you must do regularly to boost your credit score is to make sure your credit report is accurate and up to date. You certainly don’t want any false or outdated details mixed in with your report and reduce your total credit score, such as a late payment that you have paid for but your payment still has not been included in the report, or a service which you didn’t order for but still got included in your report anyway. When reviewing your report, should you spot any false information as mentioned above, you need to report it to the credit bureau immediately to have them removed it from your credit report. Otherwise, it may continue to lower your score, as well as your chances of earning future credit. 

4. Lower your debt-to-income ratio. 

Another way which lenders and creditors find helpful in evaluating your credit score and your ability to manage and repay your debts is via your debt-to-income ratio which is a personal finance measure comparing your debt payment every month and your total income. This ratio is obtained by dividing your total recurring monthly debt by monthly income. 
A low debt-to-income ratio shows lenders that you have a good balance between your debt and how much you earn, while a high debt-to-income ratio is a sign of you having more debt that you can pay with more total income, making you a higher lending risk. 
You can improve the situation by paying down your debts, making positive impact on your credit score. 

5. When should you start improving your credit score? 

Your credit score can be obtained via many years of your past bill-paying behavior. Even though the improvement isn’t going to happen overnight, it’d be better for you to start having positive financial habits as soon as possible, thus gradually increasing your credit score. 

6. Conclusion

In concluding, it is important to build a solid credit history and maintain a high credit score since it can affect how your lenders, creditors, and maybe even your partners look at you and it can also have substantial impact on your overall financial life, both at the present and in the future. 

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