When your credit score has fallen below average, you are likely to find difficulties getting approved for different forms of credit such as car loans. Fortunately, there are certain ways to improve your credit score and some of these ways provide quicker results.
Having a good credit score allows you to access lower interest rates, better terms, and even more loan products. Here are 6 ways you can improve your credit score faster.
1. Know Everything about Your Bill Payments
The most important factors determining your credit score include:
- Your payment history
- Credit usage
- Age of your credit accounts
- Mixture of credit
- New credit inquiries
So, your payment history has the most impact. So, it is recommended to have paid-off debts stay on your credit history. When you have a history of responsibly paying off your debts, it does good for your credit score. So, the first step you should take is to avoid late payments. The following tips should help in this regard:
- Create a filing system to keep track of your monthly bills
- Set all due-date alerts for all the different bills
- Automate bill payments from your bank account
2. Keep Credit Utilization to 30% or Lower
Credit utilization refers to the percentage of your credit limit that you should be using. Make sure to pay off your credit card balances in full every month. If that is not possible, make sure the overall outstanding balance stays at 30% or less of your overall credit limit. Continue to lower it and bring it down to 10%, which can have a huge positive impact on your credit score.
Asking for a credit limit increase can also be helpful. Most companies allow customers to make this request online.
3. Fatten Up Your Thin Credit File
A thin credit file means you have a brief credit history. There are a number of ways to fatten up this file and boost your credit score, which can further help improve your chances at payday loans and other forms of credit.
- Experian Boost: This program collects your financial data that is not usually on your credit record. Examples include utility payments and banking history.
- Get Banking History Counted: As mentioned above, you can have your banking history alone included in your credit history. It is recommended to build your savings and pay bills through your bank account on time.
- Renters Options: If you pay monthly rent, you can take advantage of services to include your rent history into your credit.
- Hard inquiries
- Soft inquiries
- Checking your own credit
- Allowing a potential employer to check your credit
- Credit card companies checking your file for pre-approved offers
- Financial institutions you already do business with performing checks
- New credit cards
- Car loans
4. Limit Your Hard Inquiries
It is further recommended to limit your hard inquiries to help boost your credit score. It is important to realize there are two forms of inquiries:
Soft inquiries involve:
These inquiries don’t affect your credit score. However, hard credit inquiries do impact your score. Examples of such inquiries include applications for:
If you must have them, avoid processing too many hard inquiries in a short period of time. Avoiding hard inquiries does help in improving credit scores by some points.
5. Debt Consolidation
If you have multiple outstanding debts, it is recommended to take out a debt consolidation loan and pay off all of them. Once done, you will have only a single payment to handle. Besides, your interest rate will be lower than that for many of your other loans. It will also help speed up the rate at which you can pay off your debt. Overall, this should have a positive impact on your credit score.
Debt consolidation should also help you improve your credit utilization percentage. It is further recommended to pay off other forms of debt, such as payday loans as quickly as possible.
6. Check & Dispute Credit Report Errors
A quick way to boost your credit score is to review your credit report for any errors. If you notice any errors, dispute them to get them removed. Studies show that half of Australians have never checked their credit report for any errors. It is recommended to take the time to review your report. You are likely to find duplicate, erroneous, or even fraudulent accounts or payments.
The major credit bureaus can provide you with a free copy of your credit report. You can, in fact, check your credit report once every week.