One key aspect of your financial health is your credit score. This three-digit number represents your creditworthiness. It is often used by employers, landlords, and lenders to ascertain your level of risk.
The general rule is that with a better credit score, getting credit facilities is faster. Not to mention, lenders will also offer you a better deal with fair terms.
In this comprehensive guide, you will learn what a good credit score is, the benefits of maintaining a good credit score, and how to really improve your credit score.
How to Improve Your Credit Score
It doesn’t take so much to improve your credit score if you follow the rules. Here are some tips for you.
Try a credit-builder loan
A credit builder loan is a small loan used to build your credit score. For example, if you have a bad credit rating, you can apply for bad credit loans in Canada that will allow you to receive a small amount of money in less than 24 hours. By repaying the loan at the right time, you will show to credit bureaus that you respect loan terms, and this will improve your credit rating.
Always examine your credit report
The first step to improving your credit score is to know where you stand. Review your credit report for errors, inaccuracies, and fraudulent activity. If you find any errors, dispute them with the credit bureau that issued the report.
Be prompt at paying your bills
Your payment history largely affects your credit score. It accounts for up to thirty-five percent of it. Don’t be shocked to discover that some late payments have been on your credit report for years. You may set up payment reminders or automatic payments to prevent late payments. Always have sufficient funds in your account to pay your bills.
Cut down your debt-to-credit ratio
This is similar to the amount of credit used compared to what your credit limit is. A high credit utilization may indicate that you depend too much on credit. Maintain your credit usage below thirty percent of your total credit available.
Never close old credit accounts
You will have less available credit if you decide to close your old credit accounts. This way, your credit utilization ratio may increase, which will have a bad impact on your credit score. Therefore, always maintain your old credit accounts. Use them occasionally so they can remain active.
Apply for credit one after the other
Never apply for multiple credit cards at the same time. Every time you apply for credit, it may lead to a hard inquiry about your credit report. Yes, this can also lower your credit score a bit. Don’t go for many credits at once. Always space out your applications. You don’t want multiple hard inquiries in a short timeframe.
Create a credit history
Assuming you have no credit record, you’ll find it difficult to be approved for credit. Begin building your record as a consumer by opening a credit card. You may also become an authorized user of a person’s charge card. Try to utilize your credit mindfully and make payments on time to establish a positive record as a consumer.
Hire a credit counsellor
Work with a credit counsellor if you struggle with debt. This expert can help you devise a debt repayment plan suitable for your situation. The aftermath could be a reduction in interest rates. A budget can also be developed on your behalf to help you pay off debts.
What is a Good Credit Score?
Even though the range of a good credit score varies, generally a fair credit score starts from 580 to 669. Also, when your credit score is between 670 and 739, it is considered good. Meanwhile, from 740 to 799 is very good, while 800 and above is an excellent score.
Having a good credit score is essential. A good range comes from what and who judges what. Credit score companies are numerous today, and they use different parameters to determine what good credit is.
However, there are mostly accepted figures and range when it comes to determining what a good credit score is. Most credit scoring companies agree that scores between 660 and 780 are good enough.
Benefits of Maintaining a Good Credit Score
Having a good credit score opens doors to a lot of opportunities. People with exceptional credit scores are chased after by lenders who are willing to offer loan facilities. To learn more about the benefits of a good credit score, read the following below:
Have a good reputation
If you have a good credit score, getting nice offers wont stress you out too much. Offers simply come your way from every corner. You become a borrower who is trustworthy. It’s also very useful whenever you need to refinance an existing debt, or want to take a personal loan.
That’s not all, having good credit also helps you in your workplace. There are employers in some states that pull consumer credit reports in order to make decisions about who they hire, reassign, or promote.
Borrow money at cheaper rates
Again, having a good credit score helps you qualify for lower interest rates whenever you need loans for a business, an auto loan, or to remodel your house.
Save up to one percent in interest should you need to apply for a mortgage if your credit score is good. That means you may save a minimum of 200 USD every month for a 30-year mortgage on a 300,000 USD house.
Approval for higher credit limits
Apart from being easily qualified for a lower interest rate on loans and credit cards, you can also enjoy a higher credit limit on these cards. It also allows you to secure bigger loans from banks and other institutions.
The strength of your credit score is seen in almost all aspects of your financial life. Follow the tips highlighted here to improve your credit score. Have a clean credit history. Keep an eye on your credit score always and inquire if it goes down. Clear off your bills on time and reduce your debt-to-credit ratio.