Improving your credit score is not a one-day process. It’s a gradual process that you have to commit to. Subjecting yourself to this gradual process can sometimes seem like a difficult and daunting task, but the end result is always worth it. Here are 3 helpful steps you can take to readily help improve your credit score and get closer to becoming financially sound.
Pay Off Outstanding Debt
Based on calculations, your debt typically constitutes about 30% of your credit score. You may not have all of the money you need to pay off your outstanding debt in one go and that’s okay. An important first step is to calculate how much debt you owe. When this is done, analyze how much you can afford to pay at a time. Then comes the fun part: start paying. Make sure that in the course of paying off the amount that you owe you avoid accumulating more debt. The fewer debts you owe, the more chances you have to improve your credit score and gain the trust of financial institutions.
Set Reminder on Automated Payments
Early payments help to drastically improve your credit score. One way to do this is to set a reminder for payments. Setting reminders allows you to make prompt payments earlier than their specific due date. Another way to do this is to enroll in automatic payments. The automatic payment option means not only do you no longer have to pay manually, but it also means you have the opportunity to save and invest more. You always want to make sure that you pay your bills on time because missed payments can really hurt your credit score.
Keep Your Accounts Open to Lower High Credit Utilization
One way to improve your credit score is to keep all of your accounts open – even the cards you’re no longer using. You can keep the account open and designate automatic payments on them to keep them active. This way, there’s an increase in your credit history and a positive reflection on your credit score. Just be sure to keep track of all of these payments and pay them off on time, as we’ve discussed. Keeping your cards open helps lower high credit utilization, which is an index taken into consideration by lenders. The more credit reflecting on your credit card, the more your credit score increases. This is very helpful, particularly when you’re seeking a major loan.
There are times where you may have followed all of these steps to improve your credit score and things didn’t seem to change. The key is exercising patients. Credit score improvement doesn’t happen in the blink of an eye. It’s a gradual process. Stay consistent with paying off outstanding debts, make swift payments, and keep your accounts open. With time, your credit score will begin to increase, and you’ll be able to qualify for loans with better interest rates. If you would like to learn more about credit scores, check out “Your Score: An Insider’s Secrets to Understanding, Controlling, and Protecting Your Credit Score” by Anthony Davenport.