Someone once said that the biggest room in the world is the room for improvement. The same principle can be applied to credit scores. You can always improve on this critical financial facet. Here are some credit card tips that will help you improve your credit score.
To improve your credit score, you essentially need to do two things. One, identify areas that need improvement. And two, put in the work consistently. When it comes to doing the first task, be brutally honest with yourself. When it comes to putting in the work, do not stop even if, at first, you do not see any improvements. You cannot achieve financial success if you do things in fits and starts.
How long does it take to improve a credit score?
Improving your credit score can be an intimidating process, but with patience and knowledge, it is achievable. It can take several months to see any improvement. That’s why consistency is important.
Once you have identified what needs to be changed and have started the journey, stay the course. Be disciplined. Trust the process. However long it takes, do not quit.
You can check your credit report for free at AnnualCreditReport.com. Once you have reviewed your credit report, you can start taking the following steps to improve your credit score.
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1. Build your credit (pro)file
To build your credit file and profile, you must pay your bills on time. Always. No exceptions whatsoever. Late payments can have a serious negative effect on your credit score.
If you’re having trouble getting approved for a credit card on your own, consider applying for a secured credit card. With a secured credit card, you’re required to make a cash deposit that acts as a security against the credit card’s credit limit.
Try to avoid closing old credit cards, as the length of your credit history can have a positive effect on your credit score. If you’re still having trouble getting approved for a credit card, you could consider getting a cosigner. A cosigner can help you improve your credit score.
2. Don’t miss payments
Missed payments can have a significant negative effect on your credit score. To ensure you never miss a payment, set up automatic payments. Make sure you have enough money in your account to cover the payment amount to avoid overdrafts.
If you miss a payment, contact your creditor. Right away. Don’t wait for them to contact you, as this may cause things to go south pretty fast.
Pay the full amount as soon as possible to minimize the damage to your credit score. To avoid missing payments in the future, keep track of your due dates and set up payment reminders. This will help you avoid any costly late fees or other penalties that can further damage your credit score.
3. Catch up on past-due accounts
One of the most important things you can do is to make sure to pay all of your past-due accounts in full and as soon as possible. This will help to show lenders that you are taking responsibility for your debts and that you are trying to improve your credit score. Additionally, prioritize the accounts with the highest interest rates, so that you can save money in the long run.
If you are unable to fully pay off your debts, contact your creditors to try to negotiate a payment plan that is more manageable for you and is in line with your budget. If your creditors refuse to negotiate, consider using a credit counseling service to help you with your debt.
4. Pay down revolving accounts
Paying down your revolving account balances is an important factor in improving your credit score. When your monthly payments are more than the minimum due, this shows lenders that you are not overusing your credit.
It also reduces your credit utilization ratio, indicating to lenders that you are taking responsibility for your debt. Paying down your balances also helps you avoid late or missed payments, which can hurt your credit score.
Making regular, on-time payments is key to improving your credit score. Taking the time to understand your debt and payment options is an important step in the process of improving your credit score.
5. Limit how often you apply for new accounts
Avoid opening too many accounts at once or applying for too many new accounts within a short period. Too many hard inquiries on your credit report can lower your score and may raise red flags to lenders.
If you don’t have a plan, you may end up making wrong decisions. And in the financial world, choices have consequences. Have a solid and sound plan to manage your credit and understand how opening a new account can affect your credit score.
6. Monitor your credit report
Monitor your credit report regularly to check for any new accounts and make sure you are only applying for the accounts you need. If possible, try to keep your oldest accounts open and in good standing as this can also help your credit score.
Monitoring your credit report and credit score regularly will help you identify any errors or discrepancies that could be dragging down your score.
7. Stay within your credit limit
It is also important to stay within your credit limit. Going over your limit can negatively affect your score.
If you are having difficulty establishing a positive credit history, consider using a secured credit card, which requires a deposit that acts as your credit limit.
8. Ask for help
Many times, improving your credit score will mean that you ask for help. Do it. Ask. Consider asking for a credit limit increase. This can help you lower your utilization ratio and increase your score.
Ask anyone who can help. If you have had difficulties in the past, consider a credit repair service to help you improve your score. You will be amazed at the available help, but only if you ask.
If, for instance, you are a shopping addict and you always buy things impulsively – which negatively affects your credit score – you can request people to help you. These people will be your “accountability partners” and will help you to stay the course.
You can also talk to a financial expert to guide you on the changes and decisions you need to make. This may have a positive bearing on the time it may take to start seeing improvements in your credit score.
9. Pay more than the minimum balance
Making more than the minimum payment will help you pay off your debt faster and improve your credit score over time. If you have a large balance on a credit card, consider transferring it to a lower-interest-rate card to save money on interest and pay down your debt faster.
10. Keep your credit utilization low
Try to keep your credit utilization ratio (the amount of credit you use compared to your total available credit) below 30%. This will help to keep your credit utilization low, which is an important factor in determining your credit score.
Avoid maxing out your cards and try to stay below 30% utilization. This is a safe place to be. If you go above that number, it can have a detrimental effect on your credit score.
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11. Use your credit cards
This calls for another adage. A rolling stone gathers no moss. And a credit card that is “rolling” – that is, one that is being used – gathers those extra digits on your credit score.
If you have multiple credit cards, make sure you use them all occasionally. But use them wisely. This will help to keep your credit active and make sure your credit score doesn’t suffer from inactivity.
12. Apply for new credit cards prudently
Remember the saying, Too many cooks spoil the broth? The same applies to your credit scores. Too many credit cards may hurt your credit score. So you need to apply prudence when applying for new credit cards.
Here’s the golden rule: Avoid applying for new credit cards unless absolutely necessary. Check if you really need that extra credit card, or else you may end up wrecking your finances.
13. Close unused credit cards
Closing a card can cause your credit utilization ratio to rise, which can lower your credit score.
Conclusion on credit cards
Improving your credit score is doable. Very doable. But it takes time, dedication, and discipline. It involved making sacrifices. It also involves making drastic lifestyle choices and sticking with them, through thick and thin.
To many people, credit card debt is what stands between them and financial freedom. But one must do what must be done. And that is paying off credit card debt.
As Suze Orman said: “Absolutely pay off credit card debt. If you’re not getting a match in your 401(k) and you’ve got credit card debt, you’ve got to get yourself out of credit card debt. When you get out of credit card debt, your credit score goes up and interest starts to go down.”
