How to Improve Credit Score: 4 Ways to Build It

With such an abundance of credit card offers, it's not that difficult to get a new one, even when your credit score is pretty low. Every bank provides several options, and there are plenty of banks in the US. However, you probably don't want just any card; you want it to be beneficial for you with good cashback, low fees, and some other bonuses. In most cases, to be eligible for such a card, you need to have a credit score of 670 or higher. But how do you build a good credit score? Here are the main factors that affect your rating:

• Credit history and its lengths
• Payment history
• Debts
• Types of loans in use
• New credit applications
• Additional factors (negative information, inquiries, etc.)

As you can see, there are many factors that can compromise your good history of card use. Fortunately, there are also quite a few valid methods that can help you enhance your current rating, depending on your unique credit situation. Below, we’ll outline the fastest and most effective ways to improve a credit score. Whether you need to get it higher right now or want tips for keeping it high in the future, we’ve got you covered!

Keep on Paying on Time

A good credit history is all about consistency. On-time payments are always welcomed by all banks, and it is how you build a credit score fast and keep it positive all the time. This applies to any payment, be it utility bills, loans, taxes, etc. If you don’t want to keep your finances in mind all the time, you can set up automatic payments. This way, you will always be on time and raise your score.

It’s worth noting that payment history is one of the key metrics of the FICO credit score. Typically, it accounts for 35% of the calculation formula. Late payments, even just a few days overdue, can significantly worsen your score. So, avoid missing the deadlines. Set up reminders that will keep you on top of your payment schedules. Additionally, consider creating a budget spreadsheet to manage your finances more effectively.

Pay Off Any Existing Debts

Credit utilization, which is a high outstanding debt on your available credit limit, can negatively impact your credit score. Aim to keep it below 30% across all your accounts. Paying off existing debts will not only reduce your credit utilization ratio but also showcase to your creditors that you’re financially responsible. When considering this method of how to build a credit score, you can stick to one of the following tactics:

• The debt avalanche method. You concentrate on paying off your highest-interest debt first, then you go to the second, etc. It's beneficial if one or two of your loans have higher interest rates than the rest. Keep in mind that you may get penalties if you don’t make the minimum payments for other loans.
• The debt snowball method. Here, you close your debts as fast as possible by paying off the ones with the smallest balances first. This way, you can minimize the amount of interest-rate payments if you have multiple credits. But again, you need to meet the minimum payment requirements for your other loans.
• Consolidating debts. To balance financial risks, streamline your monthly finances, and feel more comfortable about payments, you can negotiate with creditors to combine your debts into a single loan and develop a repayment plan. It might be a great idea for managing multiple debts. Besides, you can qualify for a consolidation loan with a lower interest rate.

Become an Authorized User

One of the easiest ways to increase a credit score is to become an authorized user. What does it mean, and how does it work?

You can ask your friend or family member to get access to their bank account. In some cases, you will even be issued your own card, which you can use as you like. Yet, you won’t be responsible for the payments on it. This allows you to benefit from their positive credit history and responsible card usage. As a result, you’ll be able to increase your limits rapidly, apply for better bank account options yourself, and, eventually, get higher credit scores by rebuilding your credit history.

However, you should ensure that the primary cardholder maintains good payment habits and keeps the utilization low on the account you're added to. Otherwise, you won’t achieve the desired outcomes for yourself.

Get a Secured Card

One of the best tricks to increase a credit score if it's already low is to get a secure card. When you get it, the provider will set the credit limit depending on how much you deposit on your card. For example, if you deposit $300, your limit will be $300, too. If you do not pay your bills on time, the issuer will cover it with your deposit money. However, paying your secured card debts on time allows you to get higher credit scores quickly. It will be even better if you don't spend more than 30% of your credit limit without paying it off quickly.

Final Thought

Now, you know a few powerful tricks to improve a credit score. Even though this list is by no means exhaustive, and you can use additional methods, like opting for several cards or increasing your limits, those described in the article are the most effective ones. A good credit score is beneficial for any person to be prepared for possible emergencies. Besides that, you'll be eligible for better card options with extra bonuses. Therefore, developing good financial habits is essential to always get only the best.

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