A good credit score is a key to unlocking the doors to some of life’s most significant milestones and financial achievements. Whether you’re looking to finance a car, a home, or start a business, your credit score will be one of the most important determining factors in whether you’re approved for a loan – and at what interest rate. In this blog post, we’ll discuss four tips to help you build a good credit score and improve your chances of being approved for a loan.
Check your credit report regularly
The first step to building a good credit score is to keep tabs on your credit report. You’re entitled to one free copy of your credit report from each of the three major credit bureaus – Experian, Equifax, and TransUnion – every year. Review your report carefully for any errors or negative items dragging down your score. If you spot anything that looks incorrect, you can file a dispute with the credit bureau to have it removed.
Keeping track of your credit report will also help you catch signs of identity theft early on so you can take steps to resolve the issue and protect your credit. Checking your credit report regularly is one of the best ways to stay on top of your credit and ensure your score is where it should be.
Make all your payments on time
One of the biggest factors in your credit score is your payment history – specifically, whether you’ve made all your payments on time. Payment history makes up 35% of your FICO score, so it’s important to keep this in mind when trying to improve your score.
If you have any late payments or collections on your credit report, plan to get them paid off as soon as possible. Once they’re paid off, stay current on all your other bills and debts. Making timely payments will help improve your credit score over time.
Use credit wisely
How you use credit also plays a role in your credit score, you should also consider researching how does a personal loan affect your credit score. This is reflected in your credit utilization ratio, which is the amount of debt you have compared to your credit limits. For example, if you have a $1000 balance on a credit card with a $5000 limit, your credit utilization ratio would be 20%.
You should keep your credit utilization below 30% to avoid damaging your score. If possible, try to pay off your balances each month, so you’re not carrying a balance from one month to the next. Using credit wisely will help improve your score and make it easier to get approved for loans in the future.
Keep old accounts open
Closing old credit card accounts may seem like a good idea if you’re trying to get your debt under control. But in reality, it can hurt your credit score. That’s because closing an account will lower your overall credit limit, increasing your credit utilization ratio and damaging your score.
It’s generally best to keep old accounts open even if you don’t use them regularly. As long as you’re not being charged any annual fees, there’s no harm in keeping them open and keeping your options open for the future.
Following these four tips will help you build a good credit score and improve your chances of getting approved for a loan. Remember to check your credit report regularly, make all your payments on time, use credit wisely, and keep old accounts open. By following these tips, you’ll be on your way to a great credit score.