Most people don’t think about their credit score too often until it’s time to apply for a new loan or credit card. However, credit scores take time to improve. So, checking it just before you need to apply for a loan or a credit card will seldom give you the time to take the steps required to improve it. If you have a less-than-favorable credit score, here what you can do:
Check Your Credit Report
To improve your credit score, start by looking at your credit report. The information in your credit report is collected and reported by credit bureaus. When checking your credit report, it’s important to keep an eye out for discrepancies and dispute the errors as soon as you notice them.
Repay High-Interest Debts
Any debt you take on will increase your credit utilization, which will, in turn, negatively impact your credit score. So, it’s best to pay down your debts as soon as you can. If you have a few different debts, make sure to first repay the ones with the highest interest to save money.
Avoid Applying for New Credit
When you apply for new credit, be it a loan, mortgage, or credit card, the lender checks your credit history. This is called a hard inquiry and can impact your credit score. So, it’s best to avoid applying for new credit if you are trying to increase your credit score.
Make Bill Payments on Time
If you have multiple credit instruments like credit cards, loans, and mortgages, it may become difficult to keep track of multiple payments. However, you should remember that your payment history has the biggest impact on your credit score. So, it’s best if you make your bill payments on time. Ensure that you either set up automatic payments or at least a reminder to pay the bill on time.
Don’t Close Old Credit Accounts
When you close old, unused credit card accounts, you essentially increase your credit utilization ratio and decrease the average age of your credit accounts, both of which have a negative impact on your credit score.
Make sure to check your credit score every few months to know whether you are on the right track.