Your credit score can affect many different aspects of your life and can prevent you from moving forward financially if it is not high enough. So, whether you have a poor credit score because you have no credit history or have previously made poor financial decisions, here are some of the top steps you can take to ensure that you can get the credit score you need.
A good credit score is usually considered to be 700 and above, although you might aim to reach 800, as this shows that you have an almost perfect financial history. However, many people do not have credit scores over 700, and you can always take steps to increase this. To increase your credit score, buying a tradeline will definitely do the work for you.
What are the benefits?
It is important to have a great credit score. You may find it difficult to take out a loan or other credit without one as you will not be able to show lenders, such as banks, that you can repay a loan successfully. According to loan broker CashLady, “A low credit score may impact the interest rate you are offered, with a higher rate of interest being offered if the lender feels you present a high level of risk. If lenders feel that the risk of the loan not being repaid is too great, they may decide not to offer you a loan”
This also means that you may struggle to take out a mortgage, rent a property, or even buy a car. However, when you have a high credit score, you will also be able to take out bigger loans and get better terms on these loans. You will also be able to have more choice of the lender that you take out a loan with, with bigger loan companies usually only offering loans to those who have great credit scores.
If you have a good credit score, you will find that that you pay less for your car insurance and that you can take out loans that have lower interest rates, which you can find out more about at Investopedia. This means that you will be able to save money in the long run, and you will stop being so tied down to your finances. You will also be able to obtain higher credit card limits, as lenders will be able to trust you to pay your outstanding balance off, and you may even be able to obtain rewards from these credit cards, such as cashback.
Not only this, but you will be able to rent apartments and pay for utilities without having a guarantor, someone who will pay your bills for you if you are unable to. This can then allow you to be financially independent and avoid having to search for family members or friends who are willing to sign this type of contract.
How can you do it?
However, getting a great credit score is not always simple. Conversely to what you may think, to get an advantageous credit score, you need to take out a loan and pay it back on time. This will help you to build up a strong credit history that will show you to be reliable. By building up your credit history gradually, you will be able to take out bigger and better loans in the future.
You should also consider taking out a credit card. This will allow you to pay for products and services in advance and then send the sum in question to your credit card provider at the end of the month. This is called revolving credit and can ensure that you can continuously borrow and repay a small amount of money.
If you want to go one step further, you should consider opting for a credit builder credit card. These have been specially developed for those with poor credit or who have no credit history. These have low credit limits, and you will pay back a large amount of interest on any outstanding balances. This protects your lender against any failure to pay on your part. However, although they have their limitations, these can be great options for beginners before moving onto standard credit cards, and you may even be able to increase your credit limit if you prove that you can pay the money back on time.
It is also important to stop paying your bills late. Paying utility, insurance, and credit card bills late can put a strain on your credit history and can leave you unable to take out loans in the future. This means that, rather than being tempted to leave it to the last minute, you should always check that you put money aside on payday to pay for all of your fixed costs. You might also decide to set up a direct debit so that you never forget to pay.
You should also consider consolidating your debt. You can do this by taking out a larger loan that pays off all of your smaller loans. This can make your repayments easier to handle, and you will likely be able to find a loan with a lower interest rate than you are paying currently.
An alternative to consolidating your debt would be to pay off some of your accounts. Although you should always keep your oldest accounts open, having many different open accounts and outstanding balances can affect your credit score. So, you should consider paying off the balance of some of these accounts if you can. This will allow you to focus on a few main credit accounts, help you manage your repayments better, and improve the look of your finances when it comes to deciding your credit history.
Improving your credit score can make your financial life much easier, especially when it comes to taking out a loan or even a credit card. However, even the most financially savvy people may have made mistakes with money in the past or may have no credit history at all. So, by following the tips in this guide, you will be able to get your credit score up to scratch before long while also knowing the benefits of doing this, allowing you to have a more fulfilling financial future.