Bad credit can prevent you from achieving your financial goals. When you have a poor credit score, you will find it difficult to secure the financing you need to pay for your education, buy a home, purchase a car or getting a job. Since most lenders will rely on your credit history and past financial behavior when approving your loans, it is important to use credit responsibly. Here are 5 great ways to build a better credit score.
Keep your credit card balances low
One of the factors that determine your credit score is the relationship between your revolving credit and how much you are actually using. If the revolving credit you have is a small percentage of the amount you are using, your credit rating is likely to be high. This is why you should consider paying down your balances and keeping them low. You may also choose to use a personal loan to consolidate multiple credit card balances.
Eliminate nuisance balances
Having several credit cards with small balances can affect your credit score negatively. If you would like to better your credit score, you should eliminate any nuisance balances on your credit cards. Paying off all the small balances on different cards so that you remain with about two cards that you can use for everything will be helpful. This will not only help you boost your credit score but will also make it easy for you to keep track of your balances and payments.
Pay your bills on time
When you are planning to buy a home or car, you will need access to a huge sum of money at once. If your credit score drops, this will have the potential to scuttle your dreams. Regardless of the number of bills you have to pay regularly, you should ensure that all of them are paid on time. On-time payments will help to ensure that your credit is not damaged and your credit score is not hurt.
Let your accounts age
Your credit score will also be determined by the period over which you have had credit. Part of building a better credit score will involve keeping your old accounts open. If you close these accounts, they will be removed from your credit report.
Only borrow what you can afford
If you come across as a responsible borrower, there is a good chance that you will enjoy better credit scores. This is why you should build a habit of borrowing only what you can afford.
There are times when you may face financial difficulties that may result in your credit score taking a dive. Since you will not be able to correct past mistakes, you should consider negotiating any outstanding balances.