How to Raise Your Credit Score with these 5 Simple Tips
Have you ever considered your odds for something? Here’s a few: Your odds of writing a bestseller (one that’s hopefully better than Fifty Shades of Grey) are 1 in 220. Not bad. For all you parents out there who want a larger household than the modern family, your odds of having quintuplets are 1 in 4,960,000. A little harder. And for those looking for a low credit score, the odds are guaranteed if you really try. But no one wants that to happen. If you we’re one of those people who has suffered some bad luck credit wise, it may seem like you’ve beat the odds of maintaining a healthy score despite your wisdom. Fortunately, you can learn how to raise your credit score to where it was before things went downhill.
Playing for Points
Keeping your score high is like a game of chess – a reason why so many people hate to think about it. You need to watch your every move. In other words, you have to think about a ton of factors, including the timing of your payments, consistency, amounts owed and how each and every transaction will affect your credit history. Just thinking about all those things can make your head spin. Unfortunately, circumstances and personal struggles can lead to credit dips even among those who know how to play this financial game well. But pondering over those struggles isn’t worth your time. What truly matters is alleviating the woe that low credit scores are. Although you’ll need a new strategy, the techniques for raising your score aren’t complicated.
1. Reduce your highest balance
You’ve probably heard expressions that encourage you to tackle your biggest problem first. It’s sound advice in terms of raising your credit score. If you have a balance that’s larger than all the rest, try to pay this one down to the best of your ability. For example, a higher amount owed on one credit card as opposed to another causes more damage to your score than the card with the smaller balance. Remember, creditors don’t weigh all accounts and expenses the same, and they view outstanding amounts as a sign of irresponsibility, especially if they go unpaid for too long. That’s why the myth of holding onto a balance is bad advice. So if possible, focus on cutting your large balances down.
2. Dispute glaring or suspected errors
Remember songs like “Fight the Power” from Public Enemy and band names like Rage Against the Machine? Not only do they sound cool, they also inspire people to fight injustice and stand up for themselves. And yet, few people feel like they can challenge a bank or credit company, even when they mess up. Remember folks, they don’t get everything right. That’s why you shouldn’t be hesitant to dispute errors on your credit reports. There have been numerous instances where lenders deny customers because of a bad score, when in reality, there are errors in an individual’s profile. Unfortunately, many of these people assume that these numbers reflect their habits. Only if they knew. If you suspect or know for sure that there’s an error on your profile, dispute it with a credible bureau such as Equifax or Transunion Canada.
3. Pay by your report date rather than your due date
Due dates are due dates, right? As long as you pay your bills by that date, you’re fine. Well, as it turns out, it’s better to pay beforehand, specifically on your report date. There’s a reason for this. Your credit card company may report your balance on let’s say, the 5th of the month. But you normally pay on the 15th – your due date. In many cases, that’s fine, but if someone checked your credit on the 10th, and saw a relatively large balance (perhaps for $3000 – $5000), they will report that you have this outstanding debt. Granted, your overall payment history may indicate that you are not a risk, but the really picky lenders may see otherwise. That’s why paying by (or if you’re really enthusiastic, before) the report date is a good idea.
4. Blend your credit
You’ve probably heard this one word a million times when it comes to finances – diversity. A diverse portfolio is more likely to be a secure one. When it comes to credit scores, diversity is a good thing too. In fact, creditors like to see customers who can handle multiple types of credit simultaneously. It shows responsibility. You can do this by blending your credit. For example, you can add installment credit (such as a student loan or mortgage) to your revolving credit account (such as a credit card), a move that can easily boost a score by a few points or so. With that said, it’s absolutely vital you make this method work for you rather than against you. So that means making your regular and timely payments – no excuses!
5. Use responsibly
Ironically, the smallest changes in your spending habits will have the biggest impact on your credit score. So the best advice is to be responsible. Again, there’s irony in this because it can be the hardest tip to follow. There are so many temptations that can throw you off track, and many of them may seem harmless. However, it’s important for you to avoid unnecessary purchases and big-ticket expenses. You’ll keep yourself from maxing out your credit card and missing payments. When combined with a simplified budget, responsible use of plastic can work magic for your credit score.
Taking Back the Top Spot
In the opening of this post, we mentioned that there’s a 100% chance of having a bad credit score if you aim for one. The opposite is also true. If you commit to a plan that will lift you out of a monetary sinkhole, the odds of recovering or at least improving your score is 100%. It will take some time and effort, but making these changes to how you manage your finances will get you back on track. Eventually, you’ll emerge victorious in the war against a low credit score.