A good credit score can change your life. It is true when it comes to loaning money from any financial institution. Unfortunately, it can be detrimental to your financial health if your credit score is less than 700. Imagine that you are attempting to get a mortgage for your dream home, but you got declined due to your credit score. Worse yet, you can have a very unfavorable interest rate for the next 30 years, paying thousands of dollars. In this article, we will help you to increase your credit score to at least above 700. Here are a few ways to quickly optimize your chances of borrowing money:
1. Pay off all your credit card debts.
It is no secret that we should pay down all of our credit cards. Better yet, we should always carry a zero balance on the statements. Missed credit card payment has the most significant impact on your score. According to the Nerd Wallet, a missed payment can drop your credit score by 100 points. Therefore, it is crucial to identify your spending habit and make minor adjustments that may lead to a credit increase. For many of you that have multiple credit cards, consolidating debts into one payment can be extremely helpful. In reality, you may not want to accumulate any credit card debts as most credit card has an interest rate as high as 30 percent.
Learn the mindset of being rich with this book: https://amzn.to/3LT6jkE
2. Reduce the utilization rate.
The utilization rate is the amount of money you spend compared to your credit limit. For example, if my credit limit is 10,000 dollars, by spending 1,000 dollars, I have a utilization rate of 10%. Any rate less than 20% will indicate that you are a less risky spender, hence increasing your credit score. You can also increase your credit limit by requesting a higher limit through your institution. The decision will be determined by the bank based on your spending and paying habits. This will indirectly lower your utilization rate. Lastly, pay off your credit card debt as soon as you spend money. With these strategies, you can easily add 5-10 points.
Learn how to make your FU money: https://amzn.to/3LQvu7s
3. Reduce the number of hard inquiries on your account.
To understand inquiries, we need to know what they are. We allow the bank to check our credit score to see how reliable we are. There are hard inquiries and soft inquiries. Hard inquiries include applications for mortgages and loans, utility services, and credit cards. Soft inquires are checking your credit scores, credit card company checking your score, and preapproval offers from the bank. Each hard inquiry lasts about two years, and it has a moderate impact factor on your score. You can quickly boost your credit score by another five to ten points with zero inquiries.
Learn how to make your FU money: https://amzn.to/3LQvu7s
4. Avoid financial moves that damage your credit score.
Check your score often! After all, If you don’t check, you will never know. Chase Bank and Credit Karma offer free credit checks for users. It is free and easy to access your score. The report will provide tips by showing you how each item will impact your score. For example, they will tell you if you have too many hard inquiries or if you have an unpaid credit card payment. Lastly, understand that there is good debt vs. bad debt. Good debts are debts that create cash flow, and bad debts are debts that make liabilities, like upgrading your kitchen appliances. Example of good debts include rental properties, real estate that are not a primary residence, and stock/dividend investments. Most importantly, do not declare bankruptcy easily, as it can severely impact your credit score. It can go down as much as 200 points!
5. Let time run its course.
Time can solve many problems, relationships, friendships, and of course finances. For someone who has had an open credit account for 40 years, his score will be significantly higher than a young adult who opens his credit at 18 years old. Because of this, I don’t recommend people close their credit accounts. Keep your credit card as long as you can in order to obtain a long record. If you continue to make good small financial decisions, you will become financially free throughout your adulthood.
If you follow all of these tips, you can easily reach about 700-750 on your credit score. For more tips, follow my blog and I will update other financial tips to get your score to 800-850.