A credit score reflects the financial stability and well-being of an individual. While a good credit score offers you superior financial avenues, a bad credit score can leave you struggling and prohibit you from fulfilling your financial objectives. You must consider developing healthy financial habits to boost your credit and experience supreme financial benefits.
Here, we suggest some changes in financial habits to boost your credit score.
Boosting Credit Score: Top Financial Habits
A little bit of financial life changes can bring you a host of benefits. You can improve your ability to take loans, save large amounts of money in interest, get better credit card and loan terms, etc. Some effective methods to boost your credit score are mentioned below.
1. Check and Dispute Your Credit Report
Go through your credit report and know about your credit history. You can get the credit report from DueFactory.com without paying any charge.
Check personal details like name, address, contact number, etc. Do not miss checking essential financial details like repayment history, credit length, credit utilization rate, credit mix, credit limit, etc. Your credit report also details all your ongoing or new credit and loan accounts like personal loans, credit cards, mortgages, etc. If you find any errors or inaccuracies in your credit report such as the unknown accounts, incorrect credit balance, etc., do not ignore it. Raise a dispute to the credit bureau for rectification. Removing the errors will make your credit score much higher.
2. Lower Debts
Make a list of high-interest debts and devise a plan to pay them. Effective debt management can lower your outstanding loan and increase your credit score in the long run.
3. Timely Bill Repayment
If you pay your bills promptly and before the due date, there is the highest chance of having a great credit score.
To ensure timely monthly dues repayments, set up reminders. Sometimes, we miss the due date due to busy work life and other responsibilities. Setting up alerts can prevent missing the date. Alternatively, you can also automate the payments by setting auto-pay. Allow your account to debit automatically. The funds will be transferred automatically to the loan or credit account. You can also consider using apps to help keep you on track.
4. Lower your Credit Usage
While repayment history impacts the credit score the most, credit utilization rate also has a good weightage in calculating your credit score. Hence, this factor here deserves major consideration. Staying below the credit limit can help you achieve a higher credit score. You should develop a habit of keeping your credit card balances low by using less of your credit card in making payments compared to the available credit limit. If you can keep it below thirty percent, you will have a great credit score.
5. Lengthen Your Credit History
If you are an old borrower with a rather old account still open, it can work in your favor and fetch you an increased credit score. If you have had a long history of making credit card payments, it means a long credit history that can substantially boost your credit score. So, if you are considering closing one of your old credit accounts, then take a moment to think. Closing an old account will shorten your credit length and upset your credit score.
6. Have a Healthy Credit Mix
A diverse mix of credit accounts can also lead to a good credit score. If you have multiple credit accounts like home loans, credit cards, car loans, etc., and pay the dues timely, your credit score will be in the good category. Having multiple credit lines shows the lenders that you are creditworthy and can manage different accounts.
7. Limit Loans and Credit Card Applications
If you have a habit of applying for too many loans or credit lines, then be informed that it can generate multiple credit inquiries, lowering the score. Every new credit application necessitates the lender to check your credit before approving the loan. Multiple hard inquiries lower the score. Hence, we recommend you apply for a new credit only if necessary.
Wrapping up
Good financial habits can be learned and maintained gradually. Consider developing healthy financial habits like extracting the credit report frequently, paying the bills timely, lowering credit use, maintaining a good credit mix, etc., to boost your credit score.
FAQs
1. Why improving credit score is important?
Ans. Improving your credit score is important to get loans easily, fetch a low interest rate, better loan terms, higher credit limits, etc.
2. What financial habits determine your credit score?
Ans. You can improve your credit score by having good financial habits like on-time payments, lowering credit utilization ratio, not applying for many credits, maintaining a credit mix, not closing old accounts, etc.
3. How can I know my credit score?
Ans. Know your credit score by getting a credit report from DueFactory. We can provide you the credit report for free.
4. Why should I review my credit report frequently?
Ans. It is possible that your score is low due to the anomalies in the credit report. You should check the credit report to detect errors like wrong outstanding amounts, unknown loan accounts, etc. If there is any problem, you can fix it by connecting with the credit bureau and increasing your credit score.
5. Why should I take single loan at a time?
Ans. Taking a single loan at a time will allow you to focus on timely repayment and lower the risk of default. This will build an impressive credit history and a healthier credit score. Multiple loans may mean struggling with payments, missing due dates, lower debt-to-income ratio, and financial stress.