You’ve glanced at your credit report, and you’re not so happy with the score sitting on it. It’s not as high as you would like it to be. Not even close.
The good news is that you can change your credit score if you make a few changes with your personal finances. These are three simple changes that you should try:
Add to Your Credit Mix
What is your credit mix? Your credit mix is the types of credit that you have. When you have a strong variety of accounts — as opposed to a lot of one type (example: credit cards) — it shows favorably in your score.
If you don’t have a good variety of accounts, try to apply for something different, like a personal line of credit. Click the link to see what other ways applying for a line of credit can affect your financial situation over time. It can do more than fortify your credit mix.
Pay More Than Once
Bill repayments factor prominently in your credit score. If you always pay your bills in-full and on-time, you’ll typically have a higher score because of your strong payment history and lower credit utilization ratio. In turn, missing bill payments or giving only the bare minimum can have a negative impact on your score.
Anyone that needs to tackle a high debt load or catch up on late payments should consider this strategy: pay more than once a month. First, pay the bill by the deadline. Then, when you have more money to contribute a week or so later, do it again. Paying more often will help you improve your payment history and lower your utilization ratio, which could raise your score.
If you’re having trouble affording a second payment, you should look up simple ways to cut your monthly costs to help you add some savings to your budget. These savings can be put directly onto your credit card, line of credit or any other crucial account.
Raise Your Credit Limits
One of the largest components of your credit score calculation is your credit utilization — this is how much you owe versus how much credit you have available. A high credit utilization ratio is likely to damage your score because it shows lenders that you are racking up steep balances without consistently paring them down. It’s a common belief that your ratio should be at 30% or lower.
What can you do if you’re worried about your ratio? You have two options. The first option is to whittle down your debt load through a steady repayment strategy. By paying off your balances, you can increase the levels of available credit. The second option is to raise your credit limits, giving yourself a lot more credit to work with.
It’s important that you’re cautious when you’re trying to raise your credit limits. Ask your creditor if you can make this change without having to go through a hard credit inquiry — this move can negatively affect your credit score for a short period of time. You wouldn’t want your plan to improve your credit to backfire.
There’s no reason why you should feel stuck with a low credit score. You can bring it to a higher rank when you know what tips and tricks to follow.