A good credit score can open up a host of benefits from lower interest rates for mortgages to getting approved quicker for a credit card. But occasionally, bad financial decisions could lower your credit score. Fortunately, there are a few ways in which you can improve your creditworthiness. Here are the top 5 ways in which you can improve your credit score.
Enquire About Your Payment History Closing Date
For credit cards, check with your credit card issuer about when they report your payment history. Clearing your dues before this closing date, which can differ from your due date, can directly impact the calculation of your FICO score. Lower amounts owed at the time of reporting to credit bureaus can help you boost your score.
Understand Credit Utilization Ratios
A credit utilization ratio is the amount of credit that you have consumed as compared to your card limit. This ratio applies to individual credit cards and your overall credit card usage. While ratios of less than 30% are beneficial to improving your credit score, lowering your ratio to under 10% can help scores rise faster.
Apply For An Increased Credit Limit
If you are eligible, you could benefit from an increased credit limit on your card. Assuming that you don’t max out your cards, a higher credit limit can help you lower your credit ratios and improve your credit score.
Apply For Mixed Credit
Adding a mix of credit instruments like low-cost mortgages or loans could go a long way in increasing your credit score. This long-term solution can improve your credit score marginally as your credit mix only accounts for 10% of a FICO score.
Plan Your Repayment
Significant expenses on a credit card can upset the credit ratio and temporarily lower your credit score. If you can afford to pay off the entire bill, splitting the payments into two parts can help improve your credit ratio. Making part payment two weeks before your credit card issuer’s closing date and a second part payment just before this date can rectify negative changes in your credit score.
Following these simple tips with a little discipline and patience, you could soon be on your way to better creditworthiness.