3 Ways To Boost Your Credit Score
Credit Can Affect Your Insurance Rates
A lot of people know that your credit can affect the interest rates on loans like car loans and mortgages, but a lot of us don’t realize that your credit score can also affect your insurance rates. So it’s good to make sure that your credit score is as high as possible. Because you want the best interest rates and the lowest premiums possible. So I’m going to go over 3 ways that you can boost your credit score. Because it can be the difference between getting rejected or getting approved. Disclaimer, none of these strategies are guaranteed to work, because people have different debt and spending habits. For the most part they can work for the majority of us.
Keep Track of Your Credit Utilization
First thing you can do to boost your credit score is to keep track of your credit utilization. Credit utilization is calculating how much you’re spending versus how much you have. So if you have two credit cards, and they both have a $6,000 credit limit, then you have a total of $12,000 in credit. Now, let’s say you spend $3,000 combined on both cards during the month. Well, that $3,000 spent compared to $12,000 available is going to be a 25 credit utilization score. This score is good, because the credit agencies believe that anything above 30% is going to hurt your score, and anything below 30% is going to help your score.
Another example, let’s say you had one credit card with a $12,000 limit and you spent $10,200 during the month, then the $10,200 compared to the $12,000 limit is going be a 85 credit utilization score. This would hurt your credit score, because it’s above 30%. Now, if you want to fix this you have to pay down the credit card balance before the billing cycle ends. Because the credit card company is going to report this information to the credit bureaus when your billing cycle ends.
Ask For A Credit Increase To See If You Can Get More Credit
Second thing you can do is call your credit card company and ask them for a credit increase. If you get a credit increase then your credit utilization score is going to go down, because you have more credit available. So if you have a $12,000 limit on your credit card with a $3,000 balance, then you can call the credit card company and get your limit increased to $14,000, but you must maintain the $3,000 balance. Now your credit utilization score has gone from 25 down to 21.
Keep in mind, that every time you request an increase on your credit limit for a credit card, a hard inquiry is put onto your credit history, and that might hurt your credit score. So it’s important not to request them too often. When you do, you want to make sure that two things are taken care of: One, none of your credit cards or loans are past due. Two, make sure your finances have improved. More specifically, your income is higher or your credit score is better than when you first got your credit card, ideally both.
A credit card company will only approve you for a higher limit if you’re better than you were when you first opened the credit card account. Getting a credit limit increase if you have a secured credit card is more straightforward. All you have to do is add money to the refundable security deposit. So if add $60, then your limit will increase by $60.
Don’t Go Beyond 3 Installment Loans
Third thing you can do is if you have more than three installment loans such as boat loans, auto loans, and motorcycle loans. If you have more than three of them you can pay one of those off to help raise your credit score. Because the credit bureaus don’t like to see more than three installment loans at one time.
An Installment loan is a loan that you can pay back in a specified number of installments. People usually use them to pay for rent, houses, cars, or even college tuition. Installment loans are more long term than payday loans. They are still considered a short term solution, but offer longer repayment periods. And they come with a clear repayment schedule to keep you on track.
Installment loans that are 12 months are protected by rules that limit the cost of credit and the size of fees. If you do choose to use installment loans, most lenders will allow you to pay back the loan early to help reduce the total cost. Installment lenders will look at your ability to repay, your credit history, income, and personal circumstances. The principal of an installment loan is similar to a unsecured loan, except that time periods for repayment are more shorter and the interest rates charged are much higher. While unsecured loans usually have repayment periods of 1 to 5 years. Installment loans give you up to 12 months to repay the loan plus interest charges.
