We never spend much time thinking about our credit score until it is time to settle down and buy property.
If interested home buyers do not give the necessary attention to credit scores, then it means that the chances of them being approved for a loan will be significantly lower.
There is absolutely no need for you to sentence yourself to pay a fortune each month because you have a less than favourable credit score.
Here are a few tips that will give you score a boost in no time:
Step #1 – Streamline your accounts
If you are charging small amounts onto your credit card, it could have a negative effect in the long run. It’s said that it will become harder for you to manage your accounts and make payments on time.
The more cards you have with a balance, the more your score can be impacted negatively.
What experts suggest you do instead is streamline your credit accounts and use one or two cards that have the best terms and rewards for the current situation that you are in.
Step #2 – Keep old accounts open
Your credit score is largely based on the average length of your credit history. This is something that you could inadvertently change if you start closing down old accounts.
By closing down old accounts, you are basically wiping away an entire period of credit history that could have counted in your favour.
For example, if you have a credit card that has been open for 15 years and two others that have been opened for 3 and 4 years respectively, and you decide to close the oldest account, you have cut your credit history in half.
If a card issuer threatens to close down accounts, rather use one card to pay the balance in full.
Step #3 – Make sure to pay bills on time
Making payments on time seems like common sense, but when it comes to your credit score this is worth emphasizing.
According to FICO, payment history makes up about 35% of your overall credit score. This rating takes everything into account, even the payments that you made a few days late.
With payment history, it is all about longevity. The longer you pay your accounts on time, the better it will reflect on your record.
So, if you do have late payments on record, the only thing that will make up for it is the passing of time.
Step #4 – Try to keep credit balances low
If you have a large amount of credit available, your first instinct might be to use it up. Yet, this is one thing that you should avoid doing!
The more credit that is eaten up, the worse it might look to a lender. Credit utilization counts for about 30% of your credit score.
It is also viewed in two ways: how much you have charged on individual accounts and how much overall credit you have used spanning over various accounts.
A good rule of thumb is to keep utilization at 30% or lower at all times.
Step #5 – Use your free credit report
You may think that you have covered all your bases by making payments on time and by keeping your balance low, but identity theft is another factor to consider. This has led to several inaccurate credit reports and it is quite a mission to clear it up.
One way to ensure that you are not being targeted is by receiving a free yearly credit report from Experian, TransUnion, Compuscan, and XDS.
If you establish these good habits early on, you will have fewer problems later when applying for loans.