For the uninitiated, your credit score is a three-digit number that lenders use to decide whether or not to lend you money. A high credit score means you’re a low-risk borrower, which could lead to a lower interest rate on a loan. On the other hand, a low credit score could lead to a higher interest rate and could possibly mean you won’t be approved for a loan at all. So, whether you’re looking to buy a house or wondering “how do I choose the best credit card?”, here are some tips for how you can improve your credit score.
- Check your credit report for mistakes – if you find any, file a dispute with the credit bureau.
- Make all your payments on time – payment history is one of the biggest factors in your credit score.
- Only use less than 30% of your available credit – this is called your “credit utilisation ratio” and is another big factor in your credit score.
- Keep old accounts open – the length of your credit history accounts for 15% of your credit score, so it’s important to keep those accounts active.
- Sign up for automatic payments – this will help ensure you never miss a payment and damage your payment history.
- Limit new applications for credit – every time you apply for new credit, it causes a “hard enquiry” on your report, which can temporarily dock your score by a few points.
- Use a mix of different types of credit – this shows lenders that you can handle different types of debt responsibly and is another factor in your score.
- Don’t close unused accounts – as mentioned before, the length of your credit history is important, so closing old accounts can actually hurt your score.
- Become an authorised user on someone else’s account – if you have a family member with good credit, ask them to add you as an authorised user on their account. This will add positive information to your report and help improve your score over time.
- Responsibly use a credit card – this means using it for things like gas or groceries and paying it off in full each month so you don’t incur any interest charges. Credit cards can be a great tool if used correctly!
Take these tips on-board to enjoy a healthy credit score all through your adult life
There are many things you can do to enhance your credit score but these 10 tips are a great place to start! Remember, responsible borrowing habits are key to maintaining a good credit score so that you can enjoy the benefits that come with having good credit! Thanks for reading!
