5 Credit Score Improvement Tips from Industry Insiders

Credit scores can be an Achilles heel sometimes, even for the best of us. If the last few years were anything to go by, we’ve all been struggling to maintain a positive one. But there are better ways to tackle a less-than-optimal credit score than blaming the economy.

While there are no quick-fire ways to go from zero to seven hundred overnight, using the tips below can show your credit score some much-needed tender loving care. This will make for a gradual & steady improvement in your credit score while also cultivating better financial habits.

Here are 5 tips industry insiders recommend using to improve your credit score.

1. Doing away with Debts

Doing away with your debts may not be an overnight process. But if numbers are to go by, it’s one of the best ways to put your credit score back on track. Having multiple debts alone can impact your credit score negatively, let alone high-interest ones. So it makes sense to deal with them as your first line of action to improve your credit score.

If you’re employed, you can easily take a payday loan to consolidate debts. Offered by various lenders like Salad Money, these are the best loans for employed people on the market today.

If you have bad credit, you can still use a payday loan to pay off your debts that have a higher interest rate than the payday Loan. However, it is highly recommended that you look around for other low-interest options, such as credit unions. This way you not only stay on top of your debt repayment but also avoid taking on additional unnecessary debts.

2. Consistency for the Win

Being on top of your repayment schedule can help your credit score, bad credit notwithstanding. As a borrower, you need to make sure you come across as a reliable one and making consistent payments does just that. This way your lender knows you come with less risk of defaulting on your repayments. He’d be tempted to even get you better credit options.

Lenders often determine their interest rates by relying on your credit score. If your borrower reliability is on the uptick, a lender may even offer you a lower interest rate than their advertised annual percentage rate (APR). This also helps you get better credit options. You can thus manage your credit sources effectively, even lowering your credit utilisation rate.

3. Your Credit Utilisation Rate

Credit rating agencies like TransUnion & Experian often use a credit utilisation rate to know how you use your credit limit. It is considered to be an important factor in ascertaining your credit score.

Credit utilisation rates are subjective across agencies as they use different variables. As a result, there’s no standard rate or a one size fits all number. But industry insiders recommend keeping it at 30% or lower. It is especially helpful to tip-toe on this 30% threshold when you’re considering an additional mortgage or credit loan.

Calculating your credit utilisation rate is easy enough. Take your credit limit and divide it by utilised debt. For example, a credit limit of £5000 and a credit debt of £2500 would make your credit utilisation rate 50%. Ideally, it should be at £1500 or 30%. This 30% thumb rule is a good way to improve your credit score.

4. Variety is the key

Industry insiders unanimously agree on the idea of using a variety of credit mixes to keep your credit scores positively balanced. Potential lenders would like to see your ability to manage an assorted credit mix. Not only does this boost your credibility as a borrower, but it also reflects well on your credit score.

A combination of a mortgage loan and a credit card is a good example of a credit mix, where the former is an instalment credit and the latter is a revolving credit.

5. Spotting the Errors

It’s considered a wise decision to regularly read & review your credit report. This way you are better equipped to deal with potential problems that may arise with your credit score in the future. It will also help you spot errors in your credit report early on. Unchecked errors on your credit report can prove costly for you. As this is a report many lenders rely on to determine interest rates, it is vital to stay atop inaccuracies and correct them right away.

Credit rating agencies (CRAs) often issue credit reports. But you can also use sites like Annualcreditreport.com to check on your credit report for free. An error-free credit report is worth the hassle of a weekly or monthly review!

Conclusion

Credit scores are important indicators of our financial health. Having a good credit score, while not a necessity, has multiple benefits. The key factor is to keep your credit options to a minimum and when possible, to make use of low-interest options.

With a little financial discipline and commitment, you’ll be able to see improvements in your credit score. We hope these industry insider tips prove useful for you.