Building a good credit score is important. A healthy credit score helps you borrow money and access products and services like credit cards, personal and mortgage loans, etc,. because companies see you as low-risk. If lenders think you are low-risk, they will offer you better interest rates and higher credit limits. Let’s look at some effective ways to build your credit score.
Build Your Credit History
Lenders and companies will have little to no information to access your credibility if you have a thin credit history. This is especially troublesome for students or people new to the country. Thus, it is recommended to start building your credit history by using a secured credit card, becoming an authorized user on the credit card account of a parent or spouse, or becoming a co-signer.
Pay Your Bills On Time
Did you know that your record of paying bills on time is the highest scoring factor in the FICO credit scoring system? If you pay your bills on time, it shows lenders that you can manage your credit effectively.
If you miss a payment, contact your provider immediately, as how late the payment was also matters in building your credit score. We recommend setting up automatic payments or reminders so you never miss an important bill again.
Check For Errors In Your Report
When building your credit score, you should check for any mistakes or inaccuracies in your credit report. Even a typo in your address could negatively impact your credit score. For this, get free reports from all three major credit bureaus and check for fraud, identity theft, or any unpaid balances that have gone into collection. Once identified, dispute those errors and add a Notice of Correction for special circumstances.
Keep Credit Utilization Low
Utilization is also a large factor in building your credit score. The best way to do this is to ask for a credit increase and keep your balance the same. This will ultimately lower your credit utilization, preferably below 30%, and improve your credit history.
All of the above-mentioned tips greatly impact your credit score; thus, if you are planning to apply for a loan, ensure you are following all these practices. For more information about credit scores, check out Credit Builder LLC. We have over 20 years of experience in the finance industry and help people understand credit and how it functions in simple terms.