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Your credit score is a vital aspect of your financial health, affecting everything from your ability to secure loans to the interest rates you receive on credit cards. A high credit score increases your chances of getting approved for credit at the best possible rates. Fortunately, there are several things you can do to improve your credit score. We reveal what are some of the top methods of increasing your score. We’re not going to start out with the obvious, paying bills on time. Of course that helps. We’re going to look at some other ways you may have not thought of.
1. Review your credit report for errors and fix
Review your credit report regularly and identify and correct any mistakes. As much as 1 in 5 credit reports contains incorrect information. Reviewing these mistakes can improve your score. Submit a dispute with the credit agencies (Equifax, Experian, and Transunion) through their websites and receive updates on the progress.
2. Consolidate stubborn credit card balances in a personal loan
Use a low interest personal loan to pay down revolving credit card balances which you are unable to pay off in the next 12 months. This moves the debt from a high interest credit card to a lower interest personal loan resulting in interest savings, a lower revolving credit card utilization rate, and an improved credit mix. The personal loan you take is also classified as an installment loan while a credit card is a revolving line of credit. The distinction is important. You get a higher credit score for having a mix of credit types. Have it all on revolving lines results in a lower credit score. You also have one monthly payment and are able to pay this down anytime you want.
3. Transfer high credit card balances to a 0% Intro APR card.
This can be an effective way to reduce your interest expense if you have balances you are unable to pay off in the short term. It is important to review the balance transfer details to see what the charge is for transferring the balance. If say you have a 25% interest credit card but are able to transfer the balance to a 0% card for a 3% balance transfer fee, then you are definitely better off during the term of the 0%. Perhaps you can event pay off your balance during that time through some aggressive budgeting. This also could lower your minimum monthly payment but be sure to be aggressive and paying this down. Don’t just pay the minimum and load up on more credit. Remember though, the personal installment loan is a more effective option than adding another revolving line of credit. Have a look at item 1 above first before considering more credit cards.
4. Do not close one credit card when opening another
This one is less understood and can go against the conventional thinking of closing and cutting up those cards. The key here is to have enough open credit lines with a small amount of balance. If you close cards down then your balance on other cards as a % of your credit lines will be much higher. Your credit utilization will look very high and your score will go down. Having more lines open results in a lower credit utilization which increases your score. There is a balance here of course. You also don’t want to fall into the trap of having loads of cards with open balances. The best thing to do is to keep one or more open but put away in a safe deposit box/drawer and don’t use unless you absolutely have to for an emergency.
5. Adding Netflix, phone and utilities to your credit report
This is a an awesome way to get credit for things you pay every month regardless. This is a FREE service offered by Experian that gives credit for recurring monthly expenses. It’s called Experian Boost® When you connect your bank, credit card or service provider to Boost, they will look for bills with positive history that you can add to your Experian credit file. It could also instantly raise your FICO® Score! FREE to Signup Here.
6. Setup Automatic Payments on all credit reporting debt
This is something of a must have. It is just far too painful to miss a payment on a credit card, car payment, or mortgage. Late payments instantly reduce your credit score and stay on your credit report for 7 years! Just setup automatic minimum payments to be safe. You can always pay more on a separate payment but you will at least never be reported late.
