Your credit score is one of the essential tools used to measure your financial health. It can tell lenders from a glance how responsible you’re with payments of loans you borrow. Therefore, a good credit score will increase your likelihood of getting approved for credit and even put you at the advantage of landing the lowest available interest rates in the market.
However, building credit can be a long process that takes lots of effort and determination. Here are some essential strategies to quickly improve your credit score:
Build Your Credit File
Building your credit history can be tricky. If you have a thin credit file, it means you have enough credit history on your file to generate a credit score. A lot of people in the UK have this problem. Here are some strategies you can use to build your credit:
Include your monthly bills on your credit report: You probably have a long history of paying bills on time, but some things like utility bills or your cellphone bills aren’t automatically included in credit reports. You can use Experian Boost to connect to your bank and add on-time payments for phone, streaming service, and utility bills to your credit report so that they reflect in your FICO Score.
Rent reporting companies: Some companies will help you will report your monthly rent payments to the credit bureaus. Some will charge a fee for this service while others are free, so check the details beforehand. Also, note that reporting rent payments often affects your Vantage Score credit scores, not your FICO score.
Nonprofit lending circles: This is an organized group of peers who lend and help build each other’s credit.
Don’t Miss Payments
No strategy to recover your credit score will be effective if you make payments late. Worse still, late payments may stay on your reports for up to seven years. However, if you start making payments, your credit will start to rise gradually. Consequently, your odds of accessing better credit terms will also improve, and that will save you thousands of dollars in interest.
If you don’t have enough money to pay bills on time, you can borrow a bad credit loan til next payday. With it you’ll be able to enjoy a quality of life while still making strides towards a better spending history. Advantages of borrowing a bad credit loan to build your credit include:
- It can help rebuild your credit history by helping you repay your loan on time, which shows that you are a responsible borrower.
- It’s available through a seamless online application.
- It can be used for any purpose, as long as it’s not illegal.
- You’re more likely to be accepted for a bad credit loan compared to any mainstream loan.
Pay bills on time
All your efforts will go to waste if you keep falling behind your bills payment. Therefore, avoid missing payments by setting up reminders or consider automatic payments.
Your history of paying bills on time is one of the biggest scoring factors in both Vantage Score and FICO Score credit scoring systems. Therefore, when you miss a payment by more than 30 days, it’s important that you call your creditor as soon as possible. Make plans to pay and ask if the creditor would consider not reporting the missed payment to the bureau. If they can’t allow you more time, then try and pay the bills ASAP! Every month your account is marked delinquent will hurt your score.
But how fast will paying bills on time help repair your credit score? Well, that will depend on the number of payments you’ve missed and how late the payment was (a month, two months, three months, and so on). The good thing with delinquent payments is that they easily fade over time, and earning more positive reports will help your credit recover fast.
Catch Up On Past-Due Account
Besides paying your bills on time, work on paying off your credit cards. If you have numerous cards with outstanding balances, focus on the card with the highest balance to reduce your credit utilization ratio.
Clearing your outstanding debts will help improve the debt-to-income ratio, which might not be a factor that affects your credit score, but many lenders use it to gauge your eligibility.
Pay Down Revolving Account Payment
Having a high balance on your revolving credit accounts can lead to a high rate of credit utilization, which hurts your scores. Revolving accounts can include credit cards or lines of credit. If you do not pay the balance on these revolving credit accounts in full each month, the unpaid amount will carry over to the next month. That means that your arrears will accumulate over time, becoming a burden to you and consequently hurting your credit score.
Improving your credit score is a great objective, especially if you’re looking to apply for a loan or trying to qualify for some of the best rewards cards. It will take lots of effort and time to see a noticeable impact, but your efforts will be worth it.