Your credit score plays a crucial role in your financial life, and you can deduce it from the fact that lenders pay meticulous attention to it before granting you a loan. The higher the score, the better your chances of getting a loan, whereas a lower score is likely to put you in the list of unreliable borrowers or rejected applicants.
While people with a high credit score face no trouble earning credit, those on a lower end often struggle to obtain a credit card or loan. But the good news is that they can improve their credit score, though slowly, and increase the chances of getting loans or credit cards at favorable rates. And should you choose to get help from a debt management agency, you will not only repair your credit but also get out of debt sooner than later.
If your credit score is not where you want it to be, here are a few tips to help you improve it:
- Pay bills on time
When lenders review your credit history and look at your credit score, they are interested in knowing how reliable you have been in the past in terms of repayments. This is because your past payment performance tells a lot about your future payment performance. And by paying bills on time, you can leave a positive impact on your credit report. And by “bills,” we do not mean just your credit card bills or loan repayments. We mean bills such as your rent, utility bills, phone bill, and others. Even if you have a negative credit score, paying bills as agreed will gradually repair it. On the other hand, delay in paying bills, including loan repayments, will leave a negative impact on your credit score.
- Pay off debt and keep balances low on credit card
When it comes to calculating a credit score, the credit utilization ratio plays a crucial role. It is calculated by adding your credit card balances and dividing that amount by the total credit limit. For instance, if your total credit limit across all the cards is $10,000, and you only use $2,000, your credit utilization ratio is 20%. People with a high credit score tend to have low credit utilization ratios, and lenders often like to see the ratio of 30% or less in a loan applicant. You can improve this ration by paying your debt and keeping low balances on all your credit cards. A debt management consultant may also help you find the right solution to pay off your debt.
- Avoid applying for and opening new credit accounts
While you may think that by opening new accounts, you will have a better credit mix, you won’t do any good for your credit score. Unnecessary credit use will adversely affect your credit score in many ways — from having too many inquiries on your credit report to overspending to debt and whatnot. This is why it’s always a good idea to avoid applying for and opening new credit accounts if you want to improve your credit score.
Repairing your credit takes time and is possible, provided you pay bills on time and follow the advice of your debt management consultant.
If you are looking for a debt management agency to manage your debt, get in touch with us today, and discuss your requirements.