5 Ways To Improve Credit Score
Did you know that individuals with a credit score of 650 and above can save 20-40% above and beyond on their insurance policy? With potential savings like that there to be had, it’s no wonder people would look to attain a high credit score. Aside from having no claims and a clean insurance history, this is the easiest way to save large amounts of money on insurance.
If your credit score isn’t sparkling, there are things you can do to steadily improve it. Your credit score won’t improve immediately – it’s a process that takes time - because a history of improved credit behaviour has to be demonstrated. That being said, putting in the effort to improve your credit rating is worth it.
Pay bills on time
Your payment history follows you. Continually paying your monthly bills is one of the easiest ways to improve credit score. If you pay your insurance bills monthly, for instance, your credit report will show that you consistently pay what you owe. On the flip side, missing payments or being late on payments raises red flags for creditors.
Minimize your plastic use
It is recommended that you use no more than 30% of the credit available to you on your card(s). Some experts recommend 10% as the optimal usage number. If your card limit is $1000 - and you constantly charge $600 a month to it - then even if you pay it off on time, it still worries creditors that you routinely charge 60% of your credit limit each month.
If you consistently use your cards for purchases - as opposed to cash - it’d be a good idea to increase your limit (but not your spending). If your limit is increased to $2000, then a $600/month spend would account for 30% of your available credit. Obviously, the higher your limit, the lower your usage will be (this is not advocating to get the max limit and actually use your max limit).
Leave good debt on your credit report
Good debt refers to the debt that you once had, but is now paid off. Paying off a large item, such as a car or home, would be considered good debt. Some people fall under the impression that once a debt is paid, it’d be best to have it removed from their history. This is false. The more history you have of good debt, the better your credit score will be.
Don’t apply frequently for credit
Did you know that every time you apply for credit (even a credit check) it will cause a slight dip in your credit score? This slight dip usually lasts for about a year. If you have upcoming expenses, that are of the larger variety (buying a home, car, getting a student loan, etc), it is best to shop for rates in a small window. This will help prevent you from needing to access credit or your score too frequently.
Use your credit wisely
Just because you have access to credit doesn’t mean you should/need to spend it. Keep in mind, you will need to pay it back – with interest. If you’re unable to pay your credit off, it can have detrimental affects that can haunt you for years.
When used correctly, credit can be a great friend to have. Insurance companies recognize this, and so should you. We bid you good luck on your journey to increasing your credit score!