Photo from Unsplash
A variety of components, ranging from credit card balances to payment history to recent inquiries, are taken into account when calculating a person’s credit score. By keeping a high credit score, one can benefit from loans with lower interest rates and higher credit card limits. But having a low credit score can hold you back from reaching financial and lifestyle goals.
It is possible to improve a low credit score with proper effort and the right strategies. The following tips from the Forbes Finance Council provide useful advice for someone looking to increase their credit score.
1. Obtaining a Credit Card with a High Credit Limit
Antoine Sallis of Pacc 10 Enterprise asserts that a secured credit card with a high limit can drastically improve a low credit score. This is because revolving accounts like credit cards yield more points than installment accounts, such as car loans. However, it is important to ensure that the credit card utilization rate is kept at a maximum of 10%.
2. Keep Your Balance Low at the End of the Month
To maintain optimal credit health, it is best to refrain from nearing your credit limit at the end of the month. If a credit bureau records that you have exceeded your credit limit, even if you pay off the balance in the following week, it can negatively affect your credit score. If needed, it is advisable to make a partial payment before the end of the month. –John Abusaid, Halbert Hargrove
3. Make Payments That Exceed the Minimum Balance
When it comes to credit cards, it’s important to always make payments on time, and pay more than the minimum. Additionally, reducing the amount of credit used on the card with the lowest limit is recommended. To maximize your credit score, it’s best to keep your balance from reaching the limit. Moreover, it’s beneficial to keep cards that you’ve had for a while, as long as you are in good standing; this helps your score. –Sheryl J. Moore, Wink, Inc.
4. Establish Automated Payments
To avoid missing due dates and an associated decrease in credit scores, I advise student loan borrowers to take advantage of automated payments that are available through most billing platforms. This is especially critical since payment history is a huge factor in the FICO and VantageScore systems, and late payments can cause a decrease of up to 100 points that can remain on credit reports for nearly 8 years. – Tony Aguilar, Chipper.
5. It’s Recommended to Utilize Only One Credit Card
Opt for one credit card for all purchases. Charging a bit on various cards does not have a positive effect on your credit score. Instead, make one card your go-to and clear out the smaller balances on the other cards. Having one bigger balance (which should be less than 10% of the limit on that card) and a few “zero” cards is a better move to build up your credit score than having a few smaller balances. –Luz Urrutia, Accion Opportunity Fund.
6. Ensure That Your Credit Card Debt Is Below 20%
Approximately two-thirds of your credit score is determined by how promptly you pay the debts and the balance of your credit cards. Ensure your payments are kept up-to-date to reflect your current debt and aim to have your credit card debt below 20% of the limit. A good way to reach this point is to request a credit line increase. However, be disciplined enough not to keep using the card afterward. – Will Tullos, Reliant Mortgage LLC.
7. Begin by Eradicating Your Lowest Balances
In order to improve your credit score, Shashank Shekhar of InstaMortgage suggests a strategy for paying down credit card debt. Even if you are unable to pay it off in one go, paying off the smallest balance first and then working your way up can be beneficial. This method can yield positive results in less than a year.
8. Keep Track of Your Credit Utilization
Maintaining a healthy credit score can be achieved by maintaining an awareness of one’s credit utilization rate. It is important to not overuse or max out any single credit card but to use various cards instead in order to keep the percentage in line. –Mara Garcia, Phonexa Holdings, LLC
9. Improve Your Financial Literacy
Americans are faced with a multitude of financial decisions and without the proper knowledge, it can be challenging to make prudent choices. Paying off debt and avoiding late payments are important for maintaining a good credit score, but with increased financial education, individuals can be better equipped to manage their finances and move closer to their financial objectives. –Kathleen Craig, Plinqit
10. Build a Well-Balanced Program
It is possible that a low credit score is due to either late payments or an abundance of credit card debt. To address late payments, one should keep track of recent late payments, and then contact the creditor to see if they will forgive any late fees. To address high debt, set a specific date to pay it off, budget, and strive to find another source of income to stay on track. –Jose Rodriguez, Got Credit?
11. Challenge Any Inaccurate Information Forcefully
In order to raise a low credit score, you should initiate disputes with all three credit bureaus in regard to any incorrect items. Be persistent. Take care of any unpaid items and establish automatic payments for your credit card, ensuring that you pay off the balance every month. Afterward, file additional disputes. Being assertive when dealing with them can make a difference. – Amariah Olson, Yield Crowd. (You can also engage a credit repair company to file disputes on your behalf as they are highly experienced in this.)
12. Take the Time to Examine Your Comprehensive Credit Report Thoroughly
Consult your credit report to determine which actions will be most successful in increasing your score. A credit report will provide you with details regarding your payment history, amounts owed and new credit. Moreover, you may even spot an inaccuracy. According to research found in Consumer Reports, 34% of Americans have a mistake in their credit report. Resolving an error can provide a rapid and considerable boost to your score. – Evan Siegel, eGain.
13. Keep Your Oldest Credit Cards
In my profession, numerous retirees have difficulties due to their preference not to use credit cards and opting to pay with cash. Many retirees opt to close their old credit cards due to the lack of use. Maintaining a strong credit rating can be accomplished by keeping the oldest credit cards with higher credit limits open. Use them and pay them off regularly. –Trevor Wilde, Wilde Wealth Management Group.
14. Utilize An Installment Loan To Settle Your Credit Card Debt
You can improve your credit score quickly by obtaining an installment loan and using that money to pay off your credit card debt. Doing so will decrease the amount of debt you have on the cards and ideally keep your utilization for each card below 30% – which will then lead to an increase in your score.