A good credit score speaks of a good financial situation. It’s a fantastic indicator for lenders and acts as evidence that they can trust you. A strong credit score also gives you access to a variety of opportunities and provides you with key benefits for your mortgage options that people with bad credit cannot access. Sometimes it can be very difficult and intimidating to comprehend all the nuances of good credit and work toward obtaining one. To make your journey simpler, we have done the homework for you and prepared a guide with a number of helpful recommendations. Let’s explore the specifics together.
Why Is Having a Good Credit Score Important?
Having a good credit score in a sense means solving a lot of problems on your way to getting your mortgage, especially if you are facing some financial difficulties. You can get lower interest rates and pay lower charges for your loans. While there are a bunch of things that lenders consider before approving a loan or a new credit card, people who have good credit scores will definitely have more chances of getting one. Having a strong credit score can also help you negotiate better interest rates for you on a loan or on a new credit card.
Additionally, those borrowers who have a good credit score will get money from banks more easily. This is because banks are sure that those people will pay it back on time. Yet another reason to keep your credit score high is that landlords consider it important when giving a house for rent. If you’ve had an eviction notice in the past that affected your credit score, then it will be much more difficult to rent a new apartment or house. So, keeping your credit score higher will free you from all the headache of finding a new house. With your permission, your credit report can be used by a real estate broker to check if you’re able to pay for rent.
Car insurance companies also pay attention to the credit score. They do it in order to develop an insurance risk score for each applicant, so the better your credit score, the greater your chances of paying less for the insurance.
Now, let’s see what you can do to improve your credit score and have all the benefits mentioned above.
1. Keep a Good Payment History
Keep in mind that payment history has a huge impact on a credit score. The question is, what can you do to have a proper payment history? Let’s move forward and go through some of the tips that will help you to build a good payment history.
One of the primary things you can do is to make your payments on time. If you can’t do it, at least try to pay the minimum amount. Another thing you can do is pay several times in one billing cycle. This would greatly impact your credit utilization by lowering it. If you have any problems connected with paying your bills while you stay in a rented house, give a quick call to your lender.
If you’ve had debts that you’ve paid on time, then let them remain on your record because they can actually be helpful. They are a great way to demonstrate that you were able to maintain and pay off your previous loan successfully. If you can’t remember the dates for your payments, one way to track them is to set up reminders, or to automate them.
2. Avoid Requesting a New Credit Too Often
You can request a new credit several times, but not so often that it is accepted negatively. For example, when lenders ask for your credit report, it is considered a credit check. Having a lot of credit checks will be suspicious to lenders. You have to learn to control your credit checks. Try to avoid applying for credit unnecessarily.
There are two types of credit checks: soft and hard. An example of a soft credit check is when you ask for your own credit report or when your employer checks it to update their records. Soft credit checks have no effect on your credit score.
Unlike soft credit checks, hard credit checks have a huge impact on your credit score. Examples of hard credit checks are applying for a new credit card, mortgage, or loan, etc. Try not to have too many hard credit checks in a short period of time, as this will harm your credit score badly. It will be assumed that you are experiencing severe financial difficulties.
3. Keep Your Credit Utilization As Low As Possible
The next thing that affects your credit score is credit utilization. In general, it’s recommended to keep it under 30%. The easiest way you can keep it under control is to pay your balances fully. If it’s not always possible to do it, it’s better if you keep your balance at 30% of your credit limit. This will greatly impact your credit score. You can also increase your credit limit for this. Given the number of credit card businesses that accept phone calls and internet inquiries, it won’t take very long or be challenging at all.
4. Deal With Your Delinquent Bills
If you have late payments on any of your accounts, closing them is not an option. It’s recommended that you pay your bills on time in the future. This, of course, will not cover the ones that you’ve missed or haven’t paid, but will help creditors see that you’ve already started not missing your payments and will improve your credit score in the future.
5. Own Various Credit Types
Owning various types of credit will help to increase your credit score. For example, if you have a credit card, and a car loan, then your chances of increasing your credit score are much higher than someone who owns only a credit card. The only thing you have to remember is to avoid late payments.
So, we’ve explained why having a good credit score is important and what actions you can take to have a good impact on your credit score. If you have any issues with your score, consider following those tips to increase it in the future.