How to Improve Your Credit Score
Credit score plays a critical role in personal finances these days. It’s heavily integrated into many layers of society, and having a good score is a fundamental requirement for things like taking out loans and new credit cards. And yet, a surprising number of people are largely unaware of the implications their credit score has on their lives, and remain ignorant of the impact their actions have on it.
The result is that we see many people in difficult financial situations which, in many cases, could have been avoided by simply being more careful about maintaining one’s credit score at an appropriate level. There are several things to keep in mind when you want to ensure that you remain in good standing, and the reality is that a good credit score is within most people’s reach quite reasonably.
Pay on Time
By far the best thing you can do to improve your credit score is to ensure that you’re on time with all debt repayments. It doesn’t matter if it’s a small amount on a credit card, or a major loan for your house. You have to do your best to make every payment on time, and in full. If you can’t meet a deadline, let the creditor know in advance and ask them if you can work out a temporary alternative deal.
And if you do delay any payments, make sure to correct that as soon as possible. After that, pay attention to your credit score to ensure that the situation has actually been remedied. But more on that a bit later in this article.
Avoid Shifting Debt Around
Some people find themselves perpetually stuck in debt because they have unhealthy habits towards maintaining it. It’s not rare to see someone taking out a new loan just to cover an old one. As you can imagine, this strategy is not really viable in the long run, and can lead to many issues down the road. The biggest problem that most people rarely even think about though, is the impact this has on your credit score.
That’s because activities like this tend to look bad in the eyes of creditors. The way your credit score works takes this into account and can make it a bad idea to try repairing loans with other loans. Plus, any future creditors will be less likely to want to work with you if they have access to your credit history.
Be Careful with New Lines of Credit
Which brings us to our next point. New lines of credit should be considered very carefully before you go for that option. There are many implications this can have on your financial condition, but the most important one is how it affects your credit score. You’ll be hit by each incident where you take out a new loan, and even the act of verifying your credit history can have a negative impact. Unless you understand the implications on a very deep level, this is an option you should avoid.
This is linked to what we said above, but it should also be considered separately. Some people take out new lines of credit not because they need the money to fix an older problem, but simply because they can. When the option to get extra money is so easily available to you, you may eventually start looking at it as “free” money, and this is the fast track to financial ruin.
Verify Your Score Has Been Fixed
We already mentioned this briefly above, but it’s important to reiterate. Any time you’re involved in a situation where you’re fixing a past issue with your credit score, you have to see things through to the end. This means taking the extra step of verifying that the problems have actually been addressed. You’d be surprised how often it happens that a creditor forgets to update the appropriate institutions with your new status. And given the fact that you sometimes have to deal with statue of limitation issues, this can come back to bite you at the worst possible time.
While those problems are eventually fixable, this doesn’t mean that you should open yourself up to them in the first place. Preventing this from happening is as simple as checking in with your credit institutions to verify that the negative mark is no longer on your record. And if you do notice something wrong, don’t immediately jump on the offensive. Mistakes happen, and working with the other party in a calm-headed manner to fix them is often the best approach.
With some time and effort, you should develop appropriate habits for dealing with your credit score and keeping it in a good condition. It’s not rocket science, despite some people trying to convince you otherwise. And maintaining a good credit score will also teach you some healthy financial habits that are good to develop in any case.