Good credit score helps in qualifying for loans, better deals on car insurance, getting credit cards at favorable terms and more. Many factors like payment history of loans and credit cards, amount of revolving credit used, balances in one’s bank accounts, frequency of applying for credit, types of accounts, etc. affect the credit score.
Following are some tips for improving credit scores:
- Use Online Tools To Keep A Tab On Your Credit Score: The first step towards improving your credit score is to check your status. You may use free online tools as they can help you in checking your current score and also provide insights about the factors affecting credit score. This information will help in formulating a plan for credit score improvement.
- Create A Plan: After studying your credit report thoroughly, formulate an action plan to make possible improvements. You should aim to keep your credit card balance and revolving credit low.
- Set Up Payment Reminders And Automatic Payments: Avoid late payments by setting up due date alerts. Also, you can set up automatic payments as per the schedule of your pay check.
- Maintain A Low Credit Utilization Ratio: Credit utilization ratio is calculated by adding all credit card balances and dividing the amount by the total credit limit. A low credit utilization ratio is indicative of a good credit score and implies that you are managing your credit well.
- Avoid Unnecessary Credit Accounts: It is advisable to avoid opening new credit accounts as unnecessary credit may lead to overspending & accumulated debt. This may negatively affect your credit score. You should open new credit accounts in unavoidable circumstances only. Applying for new credit may harm your credit score as it results into multiple inquiries on your credit report.
- Keep Unused Credit Cards Open: Closing credit cards increase credit utilization ratio which has a negative impact on your credit score.
- Create An Emergency Fund: Build an emergency fund to ensure that you meet your debt obligations on time even during dry financial periods. You may utilize this fund, if needed instead of applying for a credit.
Improving credit score requires diligent planning and dedication over time but eventually brings about many financial benefits & provides more opportunities to achieve bigger financial goals.
Greater Central Texas Federal Credit Union is a not-for-profit financial cooperative that operates for the common benefit of its member and offers an array of services. For more information, visit 3305 E. Elms Rd., Killeen, TX -76542 or call at (254) 690-2274.