Your credit score is one of the most important aspects of your financial health. Among other things, your credit score will determine how likely you are to be approved for various lines of credit and what kind of interest rate you’ll qualify for. If you’re struggling with debt and your credit history is less than desirable, don’t panic. At Lendah, our skilled and experienced team has helped thousands of consumers get their debt under control and their financial health back on track. In this article, we’ll walk you through four steps you can take to improve your credit score.
What Factors Affect Your Credit Score?
Many financial factors affect your credit score for better or worse. When determining and calculating your score, credit bureaus look at your credit history, debt ratios, mix of credit, payment history, inquiries, collections, and more. Adverse circumstances such as high credit card balances, spotty payment history, and lots of hard inquiries can lower your credit score considerably.
How Does a Low Credit Score Affect You?
A low credit score can have a significant impact on your life, including limited borrowing options and higher interest rates. Unfortunately, the negative effects of poor credit don’t stop there. A low credit score can also result in higher insurance premiums, required deposits for utility services, difficulty obtaining housing, and it can even reduce your employment prospects in some cases. The good news is that there are steps you can take to improve your credit score.
How Can You Improve Your Credit Score?
If your credit could use a little help, there are several things you can do to give your credit score a boost. To see a significant change, it will take some time, consistency, and self-discipline. Follow these steps to improve your credit and overall financial health.
1. Review your credit history.
Start by pulling your free annual credit reports from Equifax, Experian, and TransUnion, the top three credit bureaus. Carefully review the reports to make sure your credit history is accurate and there is no fraudulent activity. Next, analyze each report to see what’s going well and what may be hurting your credit score. Make sure to review credit inquiries, account balances, payment history, and which accounts are not in good standing.
2. Get consistent with your payments.
Your payment history has a substantial impact on your credit score. An effective and simple way to improve your credit score and keep it from dipping any further is to make all of your payments on time. If you struggle to make your payments on time, create a fail-proof system to stay consistent. A simple solution is to sign up for automatic payments with your bank or lenders. You can also create a calendar with payment alerts so you never miss a due date again.
3. Keep your credit utilization rate low.
Another important factor that significantly impacts your credit score is your credit utilization rate, or how much of your available credit that you currently owe. A high credit utilization rate and high credit card balances will effectively lower your credit score. If you can’t pay off your balances in full each month, then it’s best to keep your utilization rate at 30% if you can. Another option is to ask your lender for an increase in your credit limit, but it’s important to realize that if you increase your credit limit you run the risk of taking on even more debt.
4. Consolidate your debt to improve your credit score.
While your credit might take a small temporary hit, consolidating your debt can help improve your credit score long-term in several ways. Consolidating with a personal loan allows you to pay off all of your high-interest credit card debt and resolve any delinquent accounts. Plus, paying off your credit cards will lower your credit utilization rate. Consolidating with a loan will help improve the overall mix of your credit. Lastly, having one payment instead of several can make it easier to stay consistent and on time. All of these benefits will significantly improve your credit score over time.
*It’s important to note that you should avoid closing out the accounts you’ve paid off with debt consolidation. Keeping those accounts open and at a zero balance can significantly improve your credit by allowing your accounts to continue to age over time and lowering your overall credit utilization rate.
If you want to improve your credit score as soon as possible, debt consolidation might be the best strategy to reach your financial goals. At Lendah, we can help you find the best loan to fit your needs, even if you have poor credit. Checking out your loan options with Lendah does not affect your credit, so what are you waiting for? Get started today with our quick and simple online application or give us a call at 1-844-860-0766 to learn more.