How To Improve Your Credit Score?
Unfortunately many people don’t begin to truly understand their credit score until they have already accumulated some negative financial reputation. This is a common problem for certain demographics like students, who have access to a number of credit options; many without knowing to consequences. If you find yourself suddenly faced with a bad credit score, there are several things you can do to improve it.
Apply for a Credit Card
Whilst this may seem like a Catch-22, applying for hard-to-get credit to improve your credit score; it’s one of the easier ways to tackle a bad score. You may find yourself granted only small balance credit cards with high interest rates, but if you can manage to make a successful application then you can begin to build a positive credit profile. Research suggests that the more reputable credit card companies such as Amex, Mastercard, Visa and Discovery hold more weight on influencing your credit score. Once you have one of these cards, use it as often as possible to make low-value purchases that you know you can afford to repay. This way, a high level of activity will be built upon the history of your credit card; activity that will always end in timely repayments in full.
If you have a large amount of credit outstanding on credit cards or loans and it is having an impact upon your credit score, you can consider transferring the balance to something more favorable. The best option will be borrowing the money from a family or friend and using it to pay off your debts, the lender will know no different. Another option is to contact and use one of the many established companies which pay your debts in full, and then charge you higher interest rates in monthly repayments to them. The formula behind credit scores looks at these plans in a much kinder manner than large outstanding debts on credit cards.
Many credit scoring agencies also take a much more favorable view of small balances spread over a number of cards, as they look at the percentage of available credit that you are using. For example, if you owe $500 on 4 credit cards with limits of $5,000 each, you will only be using 10% of your available credit ($2,000 of $20,000). However, if you owe $2,000 on 1 card with a limit of $5,000; you will be using 40% of your available credit. Transferring your large single balances in this manner can help the credit score formula see you as a more viable option for investment.
Apply for different Credit Types
The credit score formula takes into consideration the types of credit you are using. Unless you’re defaulting on the repayments, a number of different types of credit can help build your financial responsibility. Consider applying for, and maintaining, other options such as credit cards, bank loans, automobile finance, installment debts etc.