Having a positive credit history has always been a crucial part of life that can profoundly impact various aspects of our lives, such as landing a job, securing a house, or obtaining a personal loan. On the other hand, a bad credit standing can be a significant impediment when you need to access capital. There are numerous simple ways to improve your credit rating and get you on fiscal track for a healthy future. Let’s look at five of them:
Take Small Interest Loan
There are times in everyone’s life when we need to cash quickly. Medical bills, car or home repairs and other unexpected costs can hit without warning at any time. An accident or illness can be stressful, and the path of least resistance, especially for those with poor credit scores, can, is often a payday lender. However trying your situation, you will be far better served to research small cash loans for people with bad credit that won’t drag you down with crippling interest rates that will only add insult to injury.
Don’t Use Credit Card Indiscriminately
The secret to positive credit history is two-pronged; (i) have an active credit account, and (ii) use it with discretion. High credit card bills reflect poorly on your capacity to repay loans for things such as a car or home. With repayments draining your disposable income, lenders may view you as a high-risk borrower, making it difficult for you to get loans. One of the best credit card practices is to use only 30% of your card’s actual limit and pay off the balance in full every month. To keep a check on your card usage, set up bank alerts, and regularly check your account to ensure you don’t overspend.
Keep Credit Active
Having said that, cutting up your credit cards is also not the best option. Ratings agencies rely on an active history to provide lenders with accurate information. So, while it’s crucial to ensure that your use of credit cards does not get out of control, it’s also vital to maintain activity on your open lines of credit. Even if you only use a card once each month to fill up with gas, you’ll be contributing to a pattern that establishes you as a credible borrower. The secret is maintaining a healthy balance between your active credit lines and manageable activity.
Pay Your Bills On Time
Most of us live hectic lives, and it is easy to forget to pay bills such as utilities, phone, electricity, etc., on time. Late payments can be a warning sign to future lenders. Consistent, punctual payments will put you in good stead, and provide lenders with confidence that you will meet your financial obligations in a timely fashion. Many vendors offer automated payment services and discounts for using them. This is a win-win for everyone as you may get end up with lower bills and a healthy payment history that reflects positively on your financial habits.
Don’t Erase Debt History
There's a misconception that it is beneficial to erase debt after paying them from your credit report. Instead, let them be on your bank statement as it indicates that you have consistently paid your debts and have no history of default payments. Keeping your cleared debts on your account not only improves your credit score but also makes lenders believe that you are a trustworthy and low-risk borrower.
Sound financial planning and developing healthy credit usage habits will ensure that your ratings remain strong and help you access the capital you need for life’s luxuries.