If you have been getting a lot of negative responses from borrowers, perhaps your credit score is not so good. Yet, not everything is lost, because you can boost your credit score with a little discipline and some work.
This score is a tool that financial institutions use to know how good you are at managing your money and credits. Don’t let bad decisions of the past turn into a barrier to achieving your dreams! Here, you’ll learn how to boost your credit score, make better decisions, and become an attractive loan beneficiary.
What is Credit Score?
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Simply put, it’s a score given to you according to your financial behaviour: how much you have borrowed, if you are a good payer or if you owe someone and even if you owe more than you can pay. They know everything there is to know about your lines of credit for as far as seven years.
Based on that, you are assigned a number that goes from 300 to 850. The higher your number, the better. The rates are Excellent (800 or higher), Very good (740 to 799), Good (670 to 739), Fair (580 to 669), and Poor (300 to 579).
The Higher the Number…
Different institutions score credit users, and each has its own methodology for it. The most popular one in the country is the FICO (which stands for Fair Isaac Corporation), and they take into account:
- Number of open accounts
- Total levels of debt
- Repayment history
- Types of loans
- Length of credit history
If you have a lot of credit available to use, you pay on time every month, your debt is no higher than 30% of your income, and you have been using credit for years; you’ll probably get around 850 in your score.
But, let’s face it. Being squeaky clean when it comes to credit usage is not that simple, and sometimes you’ll need to boost your credit score.
How to Boost Your Credit Score
Having a low score doesn’t mean you won’t get a loan, but the financial institution could lend you at a higher interest rate because you have a higher risk of repayment. But you can always rehabilitate your image and boost your credit score with these actions:
- Stop borrowing and start paying. It sounds simple, but if you want to boost your credit score, you need to get back the trust of the financial institutions.
- Live on a budget. Sit down, do some numbers, and cut back on non-essential expenses. Use this money to pay back your debts.
- Start with your most expensive debt. That doesn’t necessarily mean the higher but the one that has higher interest rates. Pay the minimum in other debts and concentrate the most significant payment into the most expensive one. When you are done, move on to the second most expensive.
- Stop wasting money. Take outs and eating outside your house can hurt your wallet. Go to the market once a week or twice a month, buy everything you need for the meals you planned for this period, cook them, and eat them. You’ll reduce your feeding expenses by up to 30%.
- Learn your paying due dates. A recurring mistake is forgetting to pay your bills. It’s not even because you don’t have the money; you just forgot. Write down these super important dates, put them in your planner, and program an alarm, or a reminder on your smartphone. That way, when the next due date comes, you won’t forget.
If you do this, you’ll find that it’s easier to boost your credit score and become a more attractive loan prospect. If you are in a situation where you have just recovered from high risk to low you should make sure to sit with your financial planner and make a diligent effort to get your long term finances in order. Don’t forget to check your score periodically; that’s also a way to know if you have been a victim of identity theft or fraud.