What can a higher credit score do for you? A lot, actually.
The stronger your credit score, the easier it is for a lender to say yes when you want to borrow money, whether in the form of a new credit card, personal loan, or mortgages. And, a higher credit score could be your ticket to getting a more competitive interest rate on a loan.
If your credit score needs work, you’ll often hear that paying bills on time is the best way to improve it. And that’s good advice. Your payment history weighs more than any other factor when calculating your credit score.
But that’s not the only thing you can do to improve your credit score. You can also use this little-known trick to raise the number.
1. Get a secure credit card
With usual credit card, you are given a spending limit you can charge expenses against. With a secured credit card, you set your spending limit by putting down a deposit that becomes that limit. Or, to put it another way, your deposit secures your credit line.
A secured credit card doesn’t necessarily give you more buying power. That’s because you only charge fees against the money you have. But if you pay off your secured card on time each month, it can help you build your credit score.
2. Check your credit report
Your credit report is a summary of your credit and loan history. It shows the various accounts you have open, how much you owe, and the different types of debt in your name.
But credit reports are not immune to errors. And if you have mistakes that make you look like an undesirable borrower, fixing those mistakes can lead to a credit score improvement.
So, let’s say your credit report lists debts in your name that you never racked up. If you dispute the error, the credit bureau behind the report is obligated to look at it. And if it finds that it is, in fact, a mistake, your credit score could go up.
3. Get a credit limit increase
Another factor that goes into your credit score is you credit utilization ratio, which measures how much available revolving credit you are using at once. A ratio of 30% or less is generally considered favorable, so if yours is higher, paying off some credit card debt can help improve your credit score.
But that’s not the only way to lower your credit utilization ratio. You can also lower the ratio by raising your credit limit.
So, let’s say you owe $4,000 against the $10,000 spending limit on your credit card. That’s a 40% utilization rate. If you manage to increase your spending limit to $14,000, you’ll reduce your spending by up to 29%, which can help improve your credit score. And if you have a good account, chances are, a simple call to your credit card company will result in a higher spending limit.
Paying bills on time isn’t the only thing you can do to give your credit score a bump. These tips can help you get that number down, too — and open the door to more loan options.
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