There are plenty of changes you can make to improve your credit score. Such as paying off credit card debts and other debts on time. Improving your credit score takes time, but making small changes can increase your chances of being approved for loans, mortgages, credit cards, and other financial products in the future. So, if you’re asking ‘How Can I Improve My Credit Score?’ Funding Zest can help.
Key Points:
- A credit score is based on your financial past and indicates whether you will be a reliable borrower.
- A credit score is a number that sits between 300 and 850. The higher your score, the more attractive you are to lenders.
- To improve your credit score you should cancel any unused credit cards, pay off debts on time, and try not to take out multiple loans at once.
- It is possible to secure a loan without undergoing a credit check.
- The average credit score in the US is around 698, and you can check yours via the FICO website.
- The younger generations have lower credit scores than those older than them, with Generation Z members bearing the lowest scores on average.
What Is A Credit Score?
A credit score is a number between 300 and 850 which indicates how strong your financial history is and whether you are a reliable borrower. Your score takes into account how reliably you have paid back debts in the past, how much debt you have now, how many lines of credit you have, among other considerations.
In the US, the average score is around 698, and you can check your score via the FICO website. The higher your score, the better!
Why Does My Credit Score Matter?
Your credit score will be taken into account by lenders when you apply for a loan, mortgage, credit card, or even a mobile phone contract. This is because your credit rating represents your reliability.
While providers will consider other factors too, such as your income and how much you want to borrow, it is always in your interest to have a strong credit score. You should always consider your future financial health when considering how to nurture your credit record now. The Generation Z category has the lowest average credit score, with an average of 674. While this is high enough to secure a loan, if you neglect your credit score, you could be compromising your future ability to secure credit.
How Can I Improve My Credit Score?
While there are many ways to promote your credit score, here are a few starting points that you should consider.
Join The Electoral Register
While it may seem unrelated to financial health, the electoral register records your name and personal information, which lenders can use as confirmation of your identity. This makes it easier for lenders to approve you, and it can improve your credit score by verifying that you are who you say you are.
This is totally free for you to do, acting as a benefit for you and your potential lender.
Don’t Apply For Too Many Loans At Once
Applying for multiple lines of credit at any one time can damage your credit score. This is because you are applying for cash left, right, and center implies you’re consistently desperate for cash. This will make lenders reluctant to be your borrowing partner, as they want to know that their money is in safe hands.
Your applications will be recorded by a credit reference bureau and your credit score will be adjusted to reflect the risk you represent.
Nevertheless, there are plenty of lenders who are committed to helping borrowers who haven’t had the easiest financial ride. This means that even if your credit score is weak, you will likely still be able to get your hands on a loan.
Control Your Utilization Rate
Your utilization rate – or debt-to-loan ratio – is a percentage that shows a lender how much credit you use compared to the maximum you possibly could use. This shows a lender how responsibly you use your credit options. Your rate will be taken into account by lenders when considering whether to loan to you.
For example, if you have a credit card that allows you $1000 of credit per month, but you only use $100 of it, then your utilization rate would be 10%. Some credit rating agencies suggest you should not allow your rate to exceed 30%.
Controlling your rate can drastically improve your credit score and help you secure loans.
Cancel Any Unused Credit Cards
Having excessive credit cards with high credit limits does not look good on your credit score, as it shows that you seek a lot of credit, and could spend a big chunk of cash at any point.
If you have many lines of credit but a modest salary, lenders may steer clear of you as it implies you don’t spend within your means. As such, if you have cards that you don’t need, just pay them off or close them altogether.
If you’re looking to make immediate changes to improve your credit score, implementing these methods is a great place to start. Taking these measures to improve your credit score will undoubtedly increase your financial credibility and make you more likely to be accepted for financial products in the future.
