6 Tips to Boost Your Credit Score

There are certain moments in our lives when we need or want to borrow money – whether it’s to buy a dream home, renovate an office or finance a business. When evaluating loan requests, lenders look at various factors such as employment and income to determine if you are creditworthy enough. Another way to assess if you’re capable of paying what you borrow is your credit score.

A “credit score” is the rating from credit bureaus such as Trans Union, Experian, and Equifax. It is based on your credit history, particularly your payment history, how much money you owed, the length of time you’re managing credit, types of outstanding debt, and credit you’ve obtained recently. Maintaining a good credit score is very important, as it tells lenders that you can handle credit properly. It also enables you to qualify for lower interest rates on loans and credit cards.

How do you maintain or even boost your credit score? Here are some suggestions:

1. Pay on time. By never missing a payment, you can improve factors that affect your credit score. Your credit history will be improved, your credit balance will decrease, and the number of debts you have will eventually decline. Keep these factors in check and you will greatly boost your score. This holds true not only for loans and credit cards but also for bills. Even though credit bureaus don’t usually check bill payments, it still helps when it comes to your credit report. In case you fail to pay on time, make sure to pay as soon as you can. If it takes a long time before you make a payment, it will reflect negatively on your payment history and on your credit score. You can either use an online calendar that sends you a notification every time you need to make payments or schedule automatic payments from your checking account.
2. Go easy on new credit. If possible, do not borrow a lot of money in a short period of time. This will make you look like a risky borrower and you may find it hard to pay on a regular basis. Plan your purchases or expenses accordingly. Give it a few months before borrowing again.
3. Have different kinds of debt. As you plan your purchases, keep in mind that having different types of debt can help boost your score – if you make payments to all of your debts on time.
4. Keep credit card balances low. Pay on time and avoid getting close to your overall credit limit. The smaller the amount you’re using in relation to the amount you’re allowed to use, the better.
5. Do not close your old credit cards. This is because having a long history on credit cards tells credit bureaus that you have more experience in getting credit and paying your debts on time, and that you can manage your credit card properly.
6. Keep communication lines with creditors and lenders open. The key is to pay your debts on time, but if for any reason you can’t, ask your creditors for alternative payment options. Some may offer debt consolidation so you have lower monthly payments.

It is very important to maintain a good credit score, but keep in mind that this is not the sole factor credit bureaus look at when you need to borrow money or apply for a loan. Your financial position, income, and employment status all play a role in determining your creditworthiness. Take a look at your spending habits and improve when necessary, pay your bills and debts on time, and know when to ask for financial advice. Eventually, you will be able to get a good credit score and have the right mindset to maintain it.