The lending industry uses credit scores to gauge the creditworthiness of potential borrowers. A better credit score can increase your chances of securing credits such as loans, mortgages, and credit cards, at favourable terms. However, not everyone boasts a perfect or near-perfect score. The good news is that it’s possible to raise your credit score using various strategies. Below are the top techniques for boosting your credit score.
Create a payment schedule and stick to it
Payment history contributes about 35% of a FICO score, making it the most significant factor in credit scoring. Late or missed payments can significantly hurt your credit score. Therefore, one of the best ways to bolster your credit score is by maintaining a consistent, on-schedule payment pattern. It’s essential to ensure bills are paid timely, as delayed payments may stay on your credit record for as long as seven years.
Reduce outstanding debts
Since the ratio of your overall debt to credit affects your credit score, it’s crucial to minimise these numbers. A lower credit utilization ratio suggests responsible credit use, which can help boost your credit score. Aim for 30% credit utilization or lower. To achieve this, make an effort to keep your balances low on credit cards and other revolving credits.
Maintain older accounts
Your credit history length also plays a role in your credit score. It accounts for approximately 15% of a FICO score. Lenders favour borrowers with a long credit history, as it affords them more data to assess the borrower’s creditworthiness accurately. So, keep your older accounts open and in good standing to lengthen your credit history.
Limit new credit applications
New credit enquiries make up about 10% of a FICO score. Hard inquiries occur when a lender checks your credit score for a loan or credit card application. These remain on your credit report for two years and can slightly lower your credit score. By reducing the number of new credit applications, you can also reduce the number of hard inquiries, thereby boosting your credit score.
Dispute inaccuracies on your credit report
Credit reporting errors aren’t uncommon and can lower your credit score. If you find inaccuracies in your report, it’s essential to dispute them with the concerned credit bureau. This includes incorrect personal information, outdated information, and fraudulent transactions. Successfully disputing and removing these errors can significantly improve your credit score.
Conclusion
With responsible financial habits and a strategic approach, you can boost your credit score over time. This guide provides top techniques, such as creating a payment schedule, reducing debts, maintaining older accounts, limiting new credit applications, and disputing credit report inaccuracies. By implementing these recommendations, you can improve your creditworthiness and increase your chances of accessing better credit opportunities.
Frequently Asked Questions
- How long does it take to improve a credit score?
Improving a credit score is a gradual process that can take several months to a few years, depending on the current state of your credit activities.
- Does closing a credit card account affect my credit score?
Yes, closing a credit card account can lower your credit score by reducing your available credit and increasing your credit utilization ratio.
- Will checking my credit report lower my score?
No, reviewing your own credit report counts as a soft inquiry and does not affect your credit score.
- How often should I review my credit report?
You should review your credit report at least once a year or before applying for new credit to ensure accurate information.
- Does a higher income mean a higher credit score?
Not necessarily. Your income doesn’t directly affect your credit score. However, it can indirectly influence it by impacting your ability to pay debts.
