Do you have to take out a loan soon? Some of the most common reasons why people apply for a loan include purchasing a house, buying a car, and going back to school. Your loan will have an interest rate attached to it, and you want to keep that interest rate as low as possible. One of the ways to do that is to maximize your credit score. Remember that you can get a free credit score once per year from all major credit bureaus. If you want to increase your credit score, what should you do? There are several important tips you should follow.
Pay Down Your Existing Loans
If you want to increase your credit score, you should pay down your existing loans. Your debt to income ratio plays a significant role in your credit score. If you already have existing loans, you might not be able to take out another loan without seriously damaging your credit score. On the other hand, your credit score should improve if you pay off your existing loans because your debt to income ratio will go down. If you plan on taking out another loan, think about the loans you currently have. See if there is any way you can pay down some of the balance. This can improve your credit score, increasing your chances of having your loan application approved.
Pay All of Your Bills on Time
A significant portion of your credit score involves on-time payments. There are a lot of bills people have every month. For example, you might have a cable bill, an internet bill, a phone bill, an electric bill, a water bill, and a gas bill. All of these bills are in addition to any existing loan payments you might have. You need to make sure you pay your bills on time. If you don’t pay your bills on time, your credit score could go down. Some companies have an automatic payment feature. That way, you don’t have to worry about forgetting to pay your bill. If you pay your bills on time, your credit score should go up.
Keep Your Credit Utilization Ratio in Check
You also need to take a look at your credit utilization ratio. Many people love having credit cards because they have rewards attached to them. Furthermore, credit cards also have a hefty sign-up bonus that can entice people to apply. At the same time, you need to keep your credit cards in check. If you do not pay your balance in full every month, the interest rate can snowball quickly.
Furthermore, if you use too much of your existing credit, your credit utilization ratio could go up. If it goes too high, it could hurt your credit score. Keep your credit utilization ratio under control to maximize your credit score.
Maximize Your Credit Score
In the end, these are just a few of the many ways you can increase your credit score. Even though you might not think about your credit score daily, it is important for you to check your credit report from time to time. There might be inaccuracies in your report that you need to correct. Furthermore, you need to understand what your credit score is before you apply for a loan. You might secure a lower interest rate if you can maximize your credit score. This could save you thousands of dollars over the life of the loan. Remember that you can also reach out to a financial professional if you would like help increasing your credit score.
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