Your credit rating is a tool that helps lenders assess your creditworthiness. The higher your score, the more likely you are to secure a favorable loan and have access to certain services. On the other hand, if your score is low, it can be tough to convince a landlord that you’ll be able to pay rent on time or qualify for the loan you need.
The good news is, you can regain lenders’ trust by adopting a few healthy financial habits!
1. Analyze your credit report
Before you do anything else, take some time to analyze and understand your credit report. Late bill payments, a history of bankruptcy, and other more subtle factors can all impact your credit rating.
Take stock of the criteria used to evaluate your credit score; it’ll be easier for you to improve your rating if you understand what you’ve been doing wrong. Then, you can create a budget to avoid repeating past mistakes and get back on track!
Rebuilding your financial reputation is doable, but it also takes time. If you need a quick source of funds to get out of a sticky situation, you can apply for a bad credit loan. There are short-term financing options out there that don’t take your credit rating into account, which means you can work on improving your score while still having access to key financial resources!
2. Make your payments on time
Your payment history is very important when determining your credit rating. Make sure to pay your bills before the posted deadline as not to appear delinquent.
If you’re not able to pay off a bill in full, make sure to pay the minimum amount to avoid incurring large amounts of interest the following month.
3. Only use a portion of your available credit
Not everyone knows this, but even if you don’t exceed your credit limit and pay your statement in full, hitting your limit can hurt your credit score.
Your best option is to increase your credit limit and only use a portion of what’s available to you – ideally, no more than 30% of the full amount. If you’re constantly hitting your maximum, lenders may get worried that you won’t be able to pay off what you’ve borrowed.
4. Keep your account open
One of the criteria that affects your credit rating is how long your account has been open. An account that’s been active for a long time shows lenders that you have history and experience.
As much as possible, avoid transferring an old account to a new one. Even if your score isn’t great, it will take less time to improve your current rating than to build a new one from scratch.
5. Limit the number of credit inquiries on your file
To evaluate your creditworthiness, lenders will request a credit check from the appropriate authorities. If you have too many requests on your account, lenders might think you’re living above your means and/or having trouble managing your funds.
Aidan has been writing about personal finance for over 6 years. Prior to this, he worked as a Corporate Finance Analyst where he specialized in Due Diligence, Company Valuations and more. He is a CFA charterholder.
