6 Ways To Build Up Your Credit Score Pronto

Your credit score is one of the most important measures of your financial health. At a glance, lenders can tell how you use your credit and determine whether they should extend you any loans. An excellent credit score enables you to access new lines of credit, loans, and very low-interest rates when you borrow. 

With some effort, discipline and time, you can easily improve your credit score.

Why Is Building Your Credit Important?

Today’s economy is heavily reliant on credit. Unless you have a ton of money lying around, financing major purchases without straining your budget is impossible. More people can access essential but often expensive products and services like housing, education, and transportation thanks to credit. Building your credit score helps make life easier in several ways:

• Increased access to financing - Banks and lenders will be more likely to provide credit if you have a good credit score. This includes credit cards, loans, and mortgages.
• Lower interest rates - People with good credit tend to get lower interest rates on their debt and pay less interest than people with poor credit.
• Better loan terms - This includes being offered higher credit limits and low fixed-rate mortgages.
• Increased access to housing - Many landlords use credit scores to predict whether potential tenants will keep up with rent payments. Your chances of getting housing will reduce if you have poor credit, especially if it’s due to a rental balance or previous eviction.
• Lower insurance rates - In some states, insurance companies will charge higher rates if you have poor credit.

Why Is My Credit Score So Low?

The FICO credit scoring model classifies scores below 600 in a range of 300-850 as ‘poor’ credit. Generally, a bad credit score means you have a history of poor bills and loan payments, and there is a high chance you won’t honor your future financial obligations. Here are the primary reasons why your credit score is low:

• Late payments - Your payment history makes up 35% of your credit score. Regular late payments are recorded in your credit report and will lower your score.
• Collection accounts - A creditor can sell your debt to a collection account if they cannot secure payments. This information is recorded in your credit report and lowers your score.
• Filing bankruptcy - A bankruptcy claim will give you legal protection if you cannot pay your debts. However, it will significantly lower your credit score and scare away lenders.
• Defaulting on loans -You will be in default if you miss more than one monthly payment, and your lender can choose to forward this information to credit bureaus.
• Charge offs - A charge-off means that a creditor has given up on receiving loan payments. This information can remain on your credit score for seven years.

The Best Ways to Build Your Credit Score Fast

You now know how poor credit can affect your financial goals and hold back your financial life, let’s get to the good stuff. Here are the best ways to build up your credit score and begin your journey to financial freedom.

#1. Catch Up on Your Past-Due Bills

Did you know that late payments can stay on your record for seven years? If you currently have past-due bills on your credit report, the best way to build your credit score is to start paying them down. Missing a single monthly payment can reduce your score by up to 100 points, so you need to make a payment plan as soon as possible. 

#2. Stay Up To Date With Your Current Bills

The best way to preserve your credit score is to keep up with your monthly payments. Make sure you pay your bills on time to keep late payments from being added to your record. Ideally, you shouldn’t miss your credit card and loan payments by more than 29 days. Get in touch with your credit provider if you miss a payment by more than 30 days to discuss hardship options. They may lower interest rates or waive fees for a certain period. Also, take advantage of auto-pay options that pay off bills on the same date each month.

#3. Use Your Credit Card Strategically

Using your credit card strategically can help your credit score. For starters, try to use less than 30% of your credit limit to keep your overall credit card low and easily payable. This is known as the credit utilization rate. People with the highest scores tend to use less than 7% of their limit. You can also pay down your credit card debt before the end of the billing cycle to ensure your balance is low when your credit card issuer relays the information to the credit bureaus.

#4. Ask For a Higher Credit Card Limit

If you raise your credit card limit and maintain your spending, your credit utilization rate will decrease. You can use this tactic to help improve your credit over the long term by consistently requesting limit increases while limiting your credit card use.

#5. Dispute Credit Card Errors

Is your low score a result of an error in one of your credit reports? Request a free credit report from your credit bureau and analyze it for mistakes. This includes erroneous and negative entries that should have been removed from your record after a certain period, like late payments. If you find an error, contact the business that reported the incorrect information and your credit bureau to let them know you would like to dispute the inaccurate information.

#6. Pay Down Collection Accounts

Pay off any collection accounts as they will negatively impact your score as long as they are still open. If the collections account is too old to be listed or inaccurate, you can dispute the account with your credit bureau and have it removed from your account.

Start Building Your Credit Today

It’s never too late to start building your credit score. Ultimately, paying down your past bills and keeping up with your current payments are some of the best ways to build your credit score. 

And sometimes it’s hard to pay your bills on time and pay off loans because of your day-to-day spending habits. 

See how Monorail can help you budget, save, and shop for the things you really want.

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