Top 5 Ways to Improve Your Credit Score
For many adults residing in Brampton, there is a belief that credit scores are three digit numbers defining them.
While that’s not quite the case, there is still is some truth to it as credit scores do play a large role in determining your financial health and relatedly, social life. The system is easy to understand: If you have a high score, you’re seen as financially responsible and will be rewarded in turn. If you have a low score, accessing certain resources like credit cards,,housing loans and car loans in Brampton will be trickier.
To potentially make things even more complicated, any repeated inquiries on your credit score can actually impact the number as well.
Nursing your credit back to health takes time, but it’s worth the effort. Here are some reasons why it’s important to be conscious of maintaining or improving your credit:
How important is your credit?
It affects loan requests
Most people find themselves needing a loan at some point in their lifetimes. It could be that you want a new house, a new car, or to pay off some bills. This is where a good credit score can save you during the term of a loan–the higher your score, the lower your rate on a car loan in Brampton.
Credit scores impact Insurance Premiums
Depending on where you live, some insurers use your credit score to assess premiums. If you make insurance payments regularly, not only will it increase your credit score, but it can also help you to save in coverage.
Cable and Internet Can be Affected by Credit Scores
You may not know it but your Cell Phone, Internet and TV do check credit scores before they put you on a plan. If you have a low credit score, there are alternatives as you may be able to put down a deposit. However, it’s things like this that should motivate you to always maintain and improve your credit.
The better your credit, the more options you have. This includes better credit cards with increased rewards, better rates when you refinance, and more. However, there is no “quick fix”. It take time, and a conscious effort. With that said, here are our top 5 ways to improve your credit:
1. Make your payments on time
Yes– we know it’s theoretically an easy concept to grasp, but making payments can get difficult when there’s a lot going on.
It’s important to try and stick to a regular calendar as you will be less likely to forget or make a late payment. When you pay your bills on time, lenders are happy and you are happy. They see that you are trustworthy and this will benefit everybody involved. It’s also important to note that this rule doesn’t just apply to paying your credit card on time, it involves everything aforementioned: rent/mortgage, utilities, cell phone, cable and more.
Ultimately, if it is a bill, pay it on time. Late or missed payments can significantly harm credit scores, so it’s better to avoid it!
2. Arrange for automatic bill payments
Now that we’ve stressed the importance of paying your bills on time, here’s an easy fix for avoiding late payments: arrange for automatic bill payments!
The digital world has so much to offer, including some incredible finance tools. Long gone are the days of having to walk into a bank branch to pay off your credit bills. Now, there is a plethora of online banking platforms available through many different bank institutions. With these website, apps and widgets, you can easily set up an online payment system. That way, money will automatically be deducted from your account and paid towards your credit bills without needing you to manually do it.
This is an easy and effective preventative measure to avoid late payments.
3. Maintain Old Debts
Most people started off their credit building by opening a brand new credit card as soon they turn 18.
If you haven’t closed that account off yet, make sure to keep it open! Leaving old debts on your credit report has proven to be an effective and easy way to improve or retain your credit score. Creditors appreciate longevity when it comes to credit– the longer your history of using a credit card responsibly, the better. For example, If you regularly paid off your credit card bills for 5 years, that would impact your credit score positively.
4. Keep your Credit Card Balance Low
A general rule of thumb is to always keep your credit card balance relatively low. Try to keep your credit balance to 25% of your limit if you can. If you have a $2000 limit, it’s best to keep your balance at around the $500 mark.
Having a high card balance shows your lender that you may not be too responsible with your money. For example, if you have a $1000 credit limit and are spending $999 monthly, it doesn’t reflect a good credit spent to credit available ratio–and that’s what bureaus use to determine your score! In fact, your used credit vs. available credit ratio accounts for (on average) 30% of your credit score!
5. Use your available credit more
Have you ever noticed that people rarely carry cash or use a debit card these days? It’s a rare occurrence for a reason.
Increasing the frequency of you credit card usage (and paying it off) shows your ability to use your credit responsibly. This is another effective method in building your credit up, and having finance management reflected on your card is what lenders love to see. While we do recommend this process to build credit, we also want to caution you not to overspend beyond your means. It’s important to keep in mind of what you can afford so that you will be able to pay it off in full! For example, rather than spending the five dollars you were going to use for your sandwich, pay for it with your credit card instead.
Another motivator to use your credit card more often is that most credit cards offer some kind of incentive. Be weary–credit card companies only offer incentives to rack up, and make a profit off of interest rates. However, if you play it smart you can actually benefit from it! For example, some credit cards offer cash back rewards of up to 2%, and others offer rewards based on a points system. Ever heard of air miles? You could earn a free flight if you use your credit card to your advantage.
Ultimately, the more you use your credit card as opposed to other payment methods, the more you could potentially benefit from it.
6. Work to Pay Off Debt
This is also a simple rule. Each month, take a look at your balance, and set a target goal. Analyze your credit statement every month, and see where you’re spending the most. If it’s possible, try to cut down on costs and use the saved money to pay off any outstanding debt you may owe your creditors. The sooner you pay it off, the sooner you can rebuild trust with credit institutions and eventually earn a higher credit score.
7. Create a healthy credit mix
Have you ever been to a buffet and seen a myriad of options? Well, this is similar to the concept of having a good credit mix. Depending on whom you go to, some lenders will want to see a borrowing set, consisting of different mixes of credit. For example, credit cards, credit accounts (that are paid on-time), student loans, home loans,and car loans in Brampton make your finances and credit health look well rounded.
8. Carefully consider new credit card applications
Remember, every time that you apply for a new credit card, a loan, or refinancing, there is something called a “hard check”. If you have one too many hard checks in a short amount of time, you may set off an alarm and red flag. As a result, lenders may be hesitant to work with you. At the same time, this shouldn’t discourage you from applying for new cards. We suggest trying to spread your applications around to avoid creating any red flags on your account.
9. Increase your Credit Limit
Similar to the philosophy behind using your credit card more often, you could also request for your credit institution to increase your available credit limit. This is not to encourage you to spend more or outside of your budget, but more to prove that you can spend responsibly and not misuse your extended credit. If you utilize your credit correctly, it could definitely build credit in your favour, and move you from the red and into the green. Plus, once you do earn a better credit score, you may actually be able to utilize more of you new credit limit due to the interest savings.
10. Negotiate with your Credit Lenders
There’s an old saying that goes “If you never try, you’ll never know”. It’s hard to dispute that you missed a payment when it is tracked by creditors–but you can try to reach a mutual agreement or negotiate to erase any accounts or debts that were collected. If you contact your creditor and offer to pay your balance, and if they agree (get the agreement in writing!), you can potentially have it re-reported as “paid as agreed” or even removed from your account.
There’s one overarching takeaway from all of our tips, and that is that credit functions as an incredibly important part of modern society. Give credit to credit! It affects so many aspects of our lives that we should always strive to keep it healthy.
Although it may seem like a tall task to clean up your credit history, the results will prove to be worth it in the long run. If you’re looking to improve credit while taking out a car loan in Brampton, contact Brampton Bad Credit Car Loans today and we’ll help you navigate through the process together.
If you learned anything that you didn’t know previously, make sure to comment below! If you have any other tips or tricks that you’ve found to be useful in repairing your credit score, spread your knowledge and everyone can benefit from it!