In many cases, a potential borrower's credit score is a key factor in determining how much and at what terms a loan can be given by a financial institution. Given that most people are unable to see their financial future and when they might need a loan, it is always a good idea to ensure that you are practicing good habits when it comes to not only maintaining your current credit score but increasing it overall. Below are just a few of the ways that you can increase your current credit score.
Paying on time
It should go without saying that paying your bills in a timely manner is essential to the health of your credit score. If you have fallen behind on payments, commit to being diligent in paying your bills on time starting now. According to Transunion, even just six months of making on time payments can improve your credit score. Start today and very soon you may see the fruits of your labor.
Minimize revolving debt
This is somewhat self-explanatory. Per Experian, the best way to remedy revolving debt is to pay credit card accounts down and only use your credit cards for routine expenses each month that you will be able to pay in full monthly. This allows you to establish good payment history while minimizing the amount of revolving debt that you carry.
Not too many open accounts
According to Equifax, one of the biggest contributing factors to your credit score is the amount owed across each of your accounts. For a lender, seeing a lot of open accounts signals that there is a lot of debt already accumulated by the potential borrower. It may be a good idea to pay off and close some of those accounts that you find are ultimately hurting your financial health.
Don't apply for everything
Often, when someone applies for a credit card or auto loan, they do not necessarily realize that there is a hard inquiry placed on their credit score report each time they apply. This hard inquiry is a way for lenders to see a potential borrower's credit history to determine their eligibility to accrue the desired amount of capital. A lot of hard inquiries on your credit report can signal to future lenders, that you are constantly searching for capital and can negatively impact your odds for approval.