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While most people don’t interact with their credit score very regularly in everyday life, it’s more involved than you may think in everything you do. Financial hardships or even just forgotten bills from years ago can haunt your score, and these three numbers can often haunt your opportunities for financial success in the future.
What is a credit score?
Your credit score is a number that is generated from various statistics about your financial history. The major credit agencies assign these numbers based on your in-depth credit reports, and other financial institutions use your score as an indicator of your fiscal responsibility and reliability. While there are many nuances to the way that your score is calculated, the bulk of your score is derived from a few core factors:
- The total amount you owe across all debts
- What percentage of payments you’ve made have been on time in the last seven years
- The age of your oldest credit account that is in good standing
- Total credit inquiries and new accounts in the past two years
- Your total credit and how much of that is available credit compared to debt
Steps to improve your credit score
Though negative marks on your credit could affect it for years, there are steps that you can take that will have positive short-term effects on your credit score, while also curating a positive credit profile for the future.
Make payments on time
On-time payments throughout your credit history have one of the biggest impacts on your credit score of any factor used in its calculation and are one of the simplest ways to improve a credit score. While late payments will likely affect your credit for seven years, this number is reported by credit agencies as a percentage of total payments. If your total on-time payments in the last seven years are below 90% of total payments, your credit score will fall drastically.
Luckily, since this number is reported as an average, the best way to raise a low score is to start making payments on time today. Low scores in this category will quickly raise with consistent timely payments. If you do have credit accounts that go delinquent, pay them as fast as possible. Usually, late payments aren’t reported unless they’re around 30 days late, so quickly paying outstanding debts may avoid a hit to your credit.
Build your credit
Establishing a more robust history of responsible credit usage is key to building up your credit score. You want your credit report to show that you can be relied on to live up to your responsibilities in financial matters so that you have better opportunities. If there’s very little to go off of on your credit report, however, it can be difficult to make the case that you are deserving of trust and investment.
Just opening up a bunch of accounts to build up total credit and history could be disastrous for your score though, as we’ll discuss below. Building credit is a gradual process, but one that you can start working on a sustainable long-term plan for right away.
Slowly open new credit accounts and take out loans as you need them, but don’t commit to more than you can handle. By showing that you can be trusted to handle your debts repeatedly, you’ll gradually see higher credit limits and a reduced percentage of credit used, both of which will lead to a higher score.
Catch up past due accounts
Nothing can destroy your credit like past-due debt, and if accounts are already past due, they’re likely still doing damage to your credit score. Damages to your score like delinquent accounts can be recovered with a little effort. Part of the reason your credit score takes seven years of data into account is that everyone has financial troubles from time to time, but how well you can deal with those issues and get back on your feet can help prove to financial institutions that you are a solid investment.
Paying off past-due accounts not only helps your score by reducing the damage that these delinquent accounts are doing to your score but also reduces your overall debt burden and the total credit you have available, which also will improve your credit score.
Reduce the total debt you owe
This one may seem like the most self-explanatory of these easy ways to improve your credit score, but for many is probably also one of the most difficult. Nobody wants to have lots of debt, and it’s not like reducing what you owe is as easy as snapping your fingers. Still, any extra efforts you can make to reduce your debt, even if only incrementally, will be beneficial to you financially in multiple ways.
Paying off a debt that you owe can help avoid further interest charges, which results in even less debt that you owe tomorrow than you otherwise would have. Paying off debt reduces your total debt, which has a net benefit on your score and also will leave you with higher total available credit. The lower percentage of your available credit that you are utilizing, the higher your score will be.
Open fewer new accounts
This step can feel a little more complicated than the others, but it is still an essential piece of a good strategy to improve a credit score. On one hand, opening new accounts can increase your credit score because it gives you a larger total amount of credit and a smaller portion of total credit used once you pay off debts. On the other hand, credit agencies will view repeatedly opening new accounts as simply revolving your debt between accounts instead of actually paying it off.
Only open credit accounts that you need and strategically plan each account you open. Your credit also gets a boost from the age of your oldest credit accounts, so dealing with the same creditors repeatedly can help give your credit some extra help as well.
Credit Building Suggestions
No strategy will work if you do not pay your bills on time, late payments will stay on your credit report for up to 7.5 years if you have missed a payment by 30 days or more, you must call your creditor immediately, and pay it as soon as possible, and ask the creditor not to report your missed payment to the credit bureaus.
it is vital not to have a delinquent account on your credit report, so pay all accounts current as soon as possible, even if the creditor will still report your late payment, it is better to have the account up to date, otherwise, it will hurt your credit score.
It is important to report credit reporting errors. So it is important to check your credit report, as one mistake on your credit report can be hurting your credit score. Disputing credit reporting errors can improve your credit score very quickly.
Paying off your collection accounts is important, they can really hurt your credit score. Also paying them off will remove the risk of being sued, you may be able to negotiate with the collection agency to stop reporting the debt once you have paid it. You can also ask them you remove the collection account for your credit report.
To build your credit or to rebuild your credit, getting a secured credit card is a great way to do it. Secured credit cards are credit cards secured with your own money. once you have deposited the money on your credit card, you can use it as a normal credit card.
You can get credit for your rent and utility payments, not all credit bureaus count rent or utility payments, but the more you can show that you make your payments on time, the better your credit will be.
How does a better credit score benefit you?
When you utilize these simple ways to improve your credit score, you’ll start to see some upward movement in the overall impression that institutions have of you. While there are definitely loans and opportunities available with a below-average credit score, long-term loans like mortgages and even some jobs can be impossible to get with a low score.
Major lenders can’t take the time to get to know every person they deal with, so they rely on your credit score and credit report to represent how reliable of an investment you are for their money. A high credit score often gives you access to superior credit amounts and interest rates on many types of loans than you’d have otherwise.
How to start taking positive steps towards healthier credit
The easy way to improve your credit score is to start taking small and strategic steps towards a higher score today. Reorganizing unsustainable debt into credit accounts that can be responsibly handled over time is what credit building is all about, and that often takes proactive steps for more financial flexibility and a long-term plan.
No matter your credit score, car titles loans can be a great way to get funds quickly to take care of urgent expenses while building healthy and sustainable credit accounts. Leveraging the equity of your vehicle can quickly get you the funds you need to take charge of your finances and take back your credit. If you’re interested in learning more about title loans, read about our online title loans.Easy Ways to Improve Your Credit Score
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