Credit score plays a crucial role in deciding whether you will get approved for a credit card or not, what will be the rate of interest on your personal or car loan, or whether you will even get a credit score or now. A credit score is crucial because it is an indicator of the creditworthiness of the applicant for a lender.
It is of prime importance for the lender to assess the risk involved and then make an informed decision. Credit history is updated each month, and so is the credit score. A bad credit score is like a virus in your financial operating system. Thus, you must take steps to improve your credit score:
- Bring your Credit Limit utilization below 30%: The ideal limit of credit utilization is 30%. The credit utilization limit is calculated by diving the current outstanding balance with the highest credit balance for you.
- Report errors in Credit Report: First of all, get an accurate credit score and credit report from a reputed platform. On an estimate, one in every five people has misinformation on their credit report. These inaccuracies have the potential to make a massive impact on your credit score. So keep a regular track of your credit score and report any error that you may discover.
- Prepare a Plan: For improving the credit score, you need to have a plan. Straight away after making sure that information in your credit report is accurate, you need to make an action plan for yourself. Begin to pay off your debt rather than moving it around. Reducing your credit card balance should be your primary target.
- Become an Authorized User with Add-on Credit Card: You can become an authorized user on a credit card along with someone who already has a credit card and a good credit history. This can be easily done with someone in your family. Make sure that you choose the person who has a good credit score and a low credit utilization rate.
- Get a credit card: In case you have never had a credit card, then this can be the prime reason that your credit score is struggling. So, get a credit card which gives you benefits on your regular purchases and makes sure to pay the bill on time.
- Opt for Secured Credit Card: A credit card that is linked to a depositor requires to make a security deposit is called a secured credit card. A secured credit card requires a 70%-100% deposit. Through a secured credit card, you can build a positive payment history and improve your credit score.
- Credit Applications: Every credit application you make triggers a series of events, one of which is the lender pulling your credit report. Each pulls cause 3-5 points, and if you are on the edge of a two credit score bars, those 3-5 points can be a deciding factor.
Improving credit score is a time-consuming process, and it requires you a plan and consistent implementation. Having to worry about credit score every time you apply for a loan is not something you would like to do your whole life. Thus, it is worth the effort to put your head down and work persistently to improve your credit score.