A good credit score is essential for determining whether you are eligible for services such as getting an apartment, utilities, and cable services. For more information about how tradelines can affect credit scores, check out CoastTradelines.
What is a Credit Score?
A credit score is a three-digit number that ranges between 300 and 850 and determines your creditworthiness. Banks and lenders check your credit scores, and the higher it is, the lower the chances of you being a credit risk and hence they will offer you a better selection of credit products with low interest rates.
Uses of a Credit Score
Organizations that lend money use credit scores to assess the risk of lending money to clients and reduce losses due to bad debt. They determine which consumers are more likely to bring in revenue.
- In regard with this, consider reading: What is a Good Credit Score to Get a Business Loan?
How to Increase Credit Score
1. Pay bills on Time
Your payment details and history determines how to improve your credit scores. Paying bills on time can ensure you get excellent credit scores. You need to ensure you pay your credit card payments within 30 days to avoid hurting your credit scores. If you cannot make payments within the specified time, you can call the creditors and inform them to develop a payment plan that avoids hurting your credit score.
2. Reduce Your Loan Amounts
Clearing payments by paying more than what you owe helps show creditors that you can make payments on time and ahead of the due date. Paying off loan amounts in excess ensures the credit score improves.
3. Buy What You Can Afford
It is a golden rule to always buy things you can afford. Making purchases using your credit card is convenient; however, it is better to leave it alone if you cannot afford whatever you are buying.
4. Use Secured Credit Cards
This type of card allows you to deposit an amount of money similar to your credit and ensure you pay upfront.
5. Limit How Frequently You Apply for New Accounts
While opening up new credit accounts helps build your credit file, limiting how frequently you apply for new accounts is essential. Every application leads to hard inquiries that can hurt your credit score. To prevent harming your credit score, keep the number of accounts you open to a minimum.
Benefits of Boosting Your Credit Score By 100 Points
Improving your credit score has its benefits, especially if you do not overspend. A greater credit score may allow you to make huge purchases and provide emergency funds when necessary.
1. Additional Credit and Cheaper Loans
A higher credit score allows you a better chance at getting loans and mortgages. These services also come at lower interest rates.
2. Renting Apartments is Easier
A good credit score ensures the rental application process is easy because it makes you stand out to potential landlords.
3. You’ll Get a Good Reputation
You will get reasonable offers with a good credit score since lenders know you are a trustworthy borrower. These offers are ideal when you need to refinance existing debt or improve your issuer’s better credit card.
4. You’ll Enjoy Good Rewards and Benefits
A good credit score ensures that you get the best introductory offers and benefits. High-end credit card holders can get invites to special invites or access to online streaming platforms.
What Causes Your Score to Decrease?
Credit scores drop due to various reasons such as missed or late payments and credit report inaccuracies. Below are some of them:
1. Missed or Late Payments
Your payment history has a significant impact on your credit score. A high credit score guarantees that you will receive the finest introductory deals and perks. It is vital to enroll in automatic payment options to avoid running your credit score.
2. Applying for a Loan, Mortgage, or New Credit Cards
Lenders ask for a copy of your credit card report whenever you apply for a new credit card. They may make a hard inquiry that can significantly affect your credit score but for a short while.
3. Having One of Your Credit Card Limits Decreasing
Maxing out your credit cards and having your credit card limited can affect your credit card scores. Your issuer might decrease your credit card limit if you miss payments, make late payments, or do not use your credit card frequently.
4. Closing a Credit Card
Avoid closing credit cards unless the credit card has a substantial annual charge that you cannot afford. Closing down credit cards can reduce your credit history and increase your utilization ratio, hence decreasing your credit scores.