If you’re eyeing up a new car, house or want to start your own business, and need some money to make it happen, a healthy credit score is a must.
Lenders look at your credit rating to decide whether to lend you money, how much you can borrow and, how much interest they’ll charge.
Thankfully, there are some sure-fire ways to beef up your credit score - fast.
Check your credit report for mistakes
Don’t take your credit score at face value. Get a copy of your credit report from an agency such as AnnualCreditReport.com and look for any mistakes, or if you’ve fallen victim to fraud. You have the legal right to see a copy of your credit report.
Get a credit card
Lenders love credit cards because they signal a healthy credit score. They show you can be trusted to pay your bills on time. If you can’t get a traditional card, try for a secured credit card. After an initial cash deposit, you just have to make on-time payments and keep your balance below credit limits.
Go easy with your cards
Don’t go all David Blaine with your credit cards. Try to use them sparingly and keep your “credit utilisation ratio” at 30% or less to help boost your score. So, if your Visa has a $3,000 limit, spending $2,500 a month (and paying it back on time) will nudge that credit score in the right direction. Also, remember to cancel any unused cards which also reduces the risk of fraud if someone steals them.
Pay your bills on time
It’s an obvious one, but your payment history makes up 35% of your credit score. If you’re in the habit of leaving those manila envelopes till later, you can set up a direct debit to make payments on time. You can even pay your bills bi-monthly to avoid using all your credit limit in a oner. Even if you pay it all back on time, hurtling towards your limit in the first week of the month sends alarm bells with the agencies that track credit.
Join a credit builder account
A credit builder account is perhaps the fastest way to build credit. These accounts help you establish credit history and save money. You can check and track your credit score, monitor credit, and get access to financial tools. That way, you won’t be one of the people who refuse to access financial education.
Don’t hide paid-off debt
Once you’ve paid off your car or home loan, don’t try to get it removed from your credit report.
“Good debt” that you've paid on-time helps your credit score. The longer your history of good debt; the better your score.
Finally, make sure you take some of the shortcuts above before you apply for credit or loans. Frequent knockbacks will, you guessed it, affect your credit score.
When you’ve got your credit score in good shape, be consistent with your applications. Inconsistent applications lead to rejection. So, if you've got more than one phone number or job title, use the same one for each application.
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