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How to Improve Your Credit Score

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Most of us are acutely aware of the control our credit rating has on us and our lives. Loans, credit cards, property, even jobs - so much can depend on it, and once in the ‘bad’ it can incredibly hard to build it back up. With companies so quick to offer credit cards, it’s become increasingly harder to resist the allure of the credit card, and after a particularly tight financial time or accidental late payment consumers can find themselves trapped in bad credit. The good news though is that bad credit and past mistakes can be rectified - however, as improving your credit score can be a slow process, it’s best to get started as soon as possible. With this in mind, let’s look at ways you can improve your credit rating - starting now.

  1. Check your credit report

It may seem ridiculously simple - but the best thing you can do for your credit rating today is simply to check it for errors. Extremely common, mistakes on your credit report can result in a potentially unfair bad credit score. A consumer watchdog reported that an astonishing 80% of credit card reports contain errors, and in an independent survey it was found that as many as 1 in 4 people found their credit reports to carry mistakes. Be sure to check that any amounts are correct, and that there are no incorrect late payments. If you do find any errors, be sure to dispute them and see that they’re rectified.

  1. Never forget to pay a minimum payment

Not making your credit card payments on time is one of the biggest (and easiest) contributions to a bad credit score, and so it’s so important that you don’t forget to pay your minimum monthly payments. Whilst I understand that for some they find themselves in a position where they’re unable to, if you have a regular income then be sure to set yourself a reminder or even a direct debit so that you can ensure that at least the minimum is always being paid.

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  1. Start chipping away at the debt

Whilst easier said than done, chipping away at credit card debt really is the most effective way to better your credit score, and far more effective in the long run as not only will it better your score but you’ll actually be working towards being debt free. It’s not easy - especially for someone who has been relying on credit cards - but the first thing you can do is to stop using your credit cards. It can some serious willpower, but do everything you can to reserve use for emergencies only. Look at what you owe openly and honestly, and set yourself a budget and a plan for repayment, concentrating on paying the highest interest cards first, whilst maintaining the minimum payment on any other accounts. Reliance on credit cards can be an addictive and at times debilitating downward spiral, but the single most empowering thing you can do for yourself is to break that habit and work towards clearing - not increasing - your debt.

  1. Think of ways to boost your income

With the goal in mind of actually paying off your debt - and thus improving your credit score - try to think of any way that you can boost your income, with the sole purpose of using this money to put towards your existing debt. What are your current working hours like - do they allow for time that could be spent babysitting or dog walking? Do you have anything lying around that you could sell? Any subscriptions you could cancel? Even a spare room you could rent out? If you have a full time job, you could even try asking for a raise - anything that could bring in that bit extra to help contribute towards being debt free. For someone with a background in finance (and a reliable income), consider investing. Whilst potentially not the best idea for someone with no prior experience, for anyone with even an interest in finance investment can be a useful way to build good profit on top of your earnings. However, never invest more than you can afford to lose and be realistic about what that is, otherwise you could find yourself in more debt and worse off. With this in mind, always ensure you have an in depth understanding and seek independent advice from an established broker prior to considering this as an option.

  1. Make use of balance transfer deals

To improve your credit score, you need to eliminate interest on your debts. Whilst it’s not the ideal to build credit, if you must make purchases using your card then at least research and apply for a balance transfer card with 0% interest rates. Once (or if) approved then you’ll be able to improve your score without having to worry about increasing interest rates on your debt.

  1. Increase your current credit card limit

Increasing your credit limit (if you’re able) can actually be a way to better your credit rating, as long as you simultaneously stop spending on it and continue to chip away at the existing debt. This is because you are increasing your total available credit in comparison to the percentage of credit you’ve spent. However, should you decide to go for this option, you must be serious about paying off your debt and bettering your credit score and be certain that you will not then continue to spend your additional limit. If finances are tough, or you have a particularly costly few months coming up, then I would really recommend against doing this, in case of temptation to use your extra credit.

As we’ve discussed, a bad credit rating is changeable and doesn’t have to mean ‘forever’. With a few small changes and serious commitment, you can start the journey to bettering your credit score and eliminating your debt today. Remember though, regardless of which approach you choose it takes time and patience to better your credit score, and so if you can get started today and take your first steps towards a better financial future.

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