As you may know, having a good credit rating is important for several reasons. Not only does this indicate that we are managing our money well, but a good score can also bring several benefits. These range from helping us rent an apartment or applying for a credit card, to allowing us to buy a cell phone without having to prepay or put down a deposit.
Conversely, having a bad credit rating can have a huge negative impact, not only on your financial health, but also on your ability to make purchases, secure a lease, and possibly even get the job done. job you really want.
If you’re worried that your credit score isn’t high enough, the good news is there’s no need to despair. Read on for some helpful tips on how to boost your score so you can reap all the benefits that come with good credit.
What is a good credit score?
First, if you’re not sure what a good credit score is, according to FICO’s credit score model, your number should be between 670 and 739 to be rated “good.” The highest score that can be achieved is 850.
As of 2021, the average US credit score had climbed to 714 and 71% of Americans had a credit score of 670 or higher.
What if your credit score suddenly drops?
Unfortunately, fluctuations in credit ratings can occur, sometimes seemingly for no reason. Usually there is no cause for alarm, but sometimes the drop can be substantial.
For example, although you generally have a good credit rating, you may find that all of a sudden your credit score dropped 100 dots. This sudden drop can be very unnerving and you cannot always think of a possible reason for the drop. However, it is essential to identify the reasons for this in order to prevent it from happening again, because a drop of 100 points is significant.
Potential reasons for such a large drop could include: late or missed payments; a credit utilization rate of 100% (in other words, “maximized”); or a collection account. This is when an unpaid bill, debt, or subscription suddenly appears on your credit report and needs to be addressed quickly. or, better yet, to avoid altogether.
Here’s how to boost your score:
Whether your score is great, good, or only half decent, you might want to find ways to improve it. Here are some simple but very effective ways to increase your score over time.
- Don’t miss credit repayments
Your payment history is one of the most important things lenders will check before agreeing to let you borrow money. Therefore, it is essential that you try not to miss any payments.
To help you, you can set up automated payments from your bank account or, alternatively, you can set reminders on your phone to make sure you don’t miss a bill.
- Do not ask for too many credit products
do too much ‘difficult investigations’ in your credit history – in other words, applying for new credit, such as a credit card or loan – can negatively impact your credit score. This impact can potentially last for months, or even up to two years, and could affect your ability to borrow money when you really need it. Therefore, it is important that you try to space out your requests for new credit as much as possible. The odd “thorough investigation” won’t make much of a difference, but several in a short amount of time could create the wrong impression.
In this case, the 30% refers to your credit utilization rate – the amount of your available credit that you are using at any given time. This is the second most important factor that lenders will consider when applying, so you should try to use no more than 30% at most.
In fact, if you can limit your credit usage to 10% or even less, great – however, if that’s not a realistic option for you, then 30% is the number you should focus on.
- Solve your “overdue” accounts
If you have an overdue account, that is, an old account that still has missed payments, fixing this problem is essential if you want to improve your credit score. These unpaid debts will show up on your credit report and could make you a bad prospect for lenders.
- Dispute defects or unfair errors
It’s a good idea to check your credit reports from time to time so you can monitor your credit score. If you notice sudden changes for the worse, it may be due to an error or unfair misconduct, in which case you should report it. Inform the credit Company who sent you the report, as well as the company that made the error or unfair breach, and provide proof that there was an error.
As you can see, a below average credit score is not the end of the world. There are a number of steps you can take to troubleshoot issues and improve your score. it’s never too late to start aiming for great credit.