Having proper personal finance management habits in place is essential. It contributes to having a favorable credit score. And a positive rating is useful when you need loans and other capital funding, for debt repayment or making investments. However, not every person can always maintain a favorable credit score. But today, there are smart ways that you can implement.
Have you checked your credit score recently? And is it much below 760? If yes, then with this score you might secure the apt rate of interest for mortgages. So, you are not focusing on purchasing a home! But instead, you wish to rent a brand-new apartment. In that case, if your credit score is much below 600 and 650, you might face a real challenge, irrespective of your monthly or annual earning. There are situations, where your job was dependent on having a favorable credit. Only positive credit habits practices over a span of time will enhance your credit score significantly. However, today you have access to many ways to improve your credit score. Discussed below are some of the best ways you can refer to.
- Correct all your mistakes on the credit reports
It is essential to ensure that your credit report completely errors free. According to the Federal Trade Commission, about 5% of the customers’ detected mistake one of the three credit reports from the major bureaus. And going by the Consumer Financial Protection Bureau, the most common credit reporting mistakes comprised of the accounts getting reported as open as well as negative items staying the account, when they can eliminate. To steer clear from this, you need to implement the following two steps:
- You need to ask for free copies of the entire credit reports right from the three major credit bureaus on a federally authenticated website. Going forward, you must assess the same well. Check for the items that don’t belong to you, balance all that got paid and also the things reported many times. You can also consider other mistakes as well.
- Note and bring to notice any mistake that you locate. And you need to dispute the errors seeking assistance from a non-profit customer credit counselling agency. The three primary credit bureaus today take in any online dispute filing. And just in case you are planning to consider any for-profit credit repair firm, then be aware of the scams as well. Ensure that your rights got well explained and also that they don’t demand the total fee up front. Even if they promise you a massive increase in your credit score, then there’s a problem. Till such time you have complex credit issues, all your money might get better utilized in paying down the balances as well as generating an urgent fund. This way, you won’t have to borrow any further.
- Ensure that your payments are strategic
Are you able to make all your bare minimum payments on the desired time? Keeping track of this is essential. As your payment record will have a role to play in determining your overall credit score. When you make late payments, you gradually create the chances for negative credit score for a prolonged period. Hence, make sure that all your debts are done within the required time.
- You need to pay any outstanding bills that are sent to the collections
It explains that you are going to pay whatever you owe. And it’s always better late than never. Just in case the bill is charged off, then ensure that you pay it off entirely. Else time will pass by, and the collection process will start. And this item is bound to stay in your account for approximately another seven years.
- Minimize the credit utilization
Simply put, credit utilization is all about the amount of your available credit that you are making use presently. Additionally, it also contributes significantly to the entire score. It is estimated that by undertaking your overall credit balance and then dividing the same by the total borrowing power. The question you may ask is this that, why all this is very important. The lenders might want to know and check that you are not making excessive use of the borrowing power that’s made available to you. If you use this power excessively, then it becomes challenging to pay it all back. The ideal solution is to keep all your credit utilization beneath 30%. And if you want to enhance the credit score, you need to adhere to the following guidelines:
- Make sure that you don’t lose any of the cards or minimize the credit limit. It will drastically, decrease your entire borrowing power. And gradually, it maximizes the credit utilization.
- You also need to ensure that you make all your payments on time. For the majority of people, the simplest way to do this is to collate all the bills and pool it under one automatic payment system. Just in case your arrangement presently is a “pay check to pay check” format, you might require staggering the bills across a whole month. It is done for averting incurring overdraft expenses.
- Make sure that you pay off any outstanding bills yet to be sent to collection. Do you have to clear two or more than two months payment? If yes, it makes sense that you do so.
Furthermore, any payment that is a couple of months late will not impact your credit score as compared to the one that you make after three months or later than that. The moment your account is current, it will start to add to the positive data to the entire credit reporting system. And any late payment will get highlighted on your report.
It takes time to turn your negative credit card score to a positive one. Not all service providers and freelance finance professionals will be able to provide the best solutions. Do you want to set your credit score correct? If yes, then you can opt-in for the above-discussed guidelines and check out the difference gradually.
Marina Thomas is a marketing and communication expert. She also serves as a content developer with many years of experience. She helps clients in long-term wealth plans. She has previously covered an extensive range of topics in her posts, including business debt consolidation and start-ups.