A credit score is one of the important factors to measure someone’s financial health. It tells banks and lenders how responsibly you use credit and pay off your bills. The better your credit score is, the chances of getting loan applications or lines of credit approved are higher. People with good credit scores can also enjoy the lowest possible rates and easier repayment terms when they borrow money from a bank or financial institute.
Why Does a Good Credit Score Matter?
A good credit score helps people save lots of bucks throughout their life. They can get better rates on personal loans, mortgages, auto loans, and credit cards to save hundreds of bucks on monthly payments. Individuals with good credit ratings are low-risk borrowers and financial institutes offer them lower possible interest rates and repayment terms.
On another hand, people with poor credit scores are likely to get high-interest rates, APRs, and financial charges on debts. This is the reason, financial experts always recommend building and maintaining good credit ratings to enjoy better rates and terms.
Luckily it is possible to build or improve credit scores by following some simple steps. If you want to boost your credit rating or improve, below are some important things you can do to achieve this.
Review Your Credit Reports & Dispute Errors
Reviewing your credit reports should be the very first step toward improving your credit history and rating. It helps you know things that are working in your favor and against your current financial situation. Just get a copy of credit reports from major credit bureaus and review them to find out errors if any. You can get these reports for free in a year. If there are some errors or mistakes in your reports, be quick to dispute to get things in your favor.
Don’t Miss out on Monthly Payments
Payment history is one of the important elements in determining the credit score of an individual. And you can build an excellent credit score by making on-time monthly payments without missing out on a single one. Be it a utility bill, credit card balance, or a loan payment, make sure to pay them all before the due date. According to experts, payments that are 30 days late, can have a negative impact on credit score. Payment automation is the best way to avoid missing monthly payments. These days a lot of financial apps and tools are available that can be used to automate payments. If there are some tough repayment terms, you should reach the concerned officials and discuss the issues you face.
Consider Debt Consolidation
If there are multiple outstanding debts, you can opt for consolidating your debts to pay off all your balances without paying lots of bucks towards interest. Check your bank or financial institute for a debt consolidation loan and convert all your loans into a single monthly payment. Consolidation loans with lower interest rates also help you pay down debts faster while saving money as well.
This approach can also work for you if you need to pay multiple credit card balances. Just get a balance transfer credit card and transfer all your balances to the new card. These cards come with a 0% introductory APR on the total balance. This means, you just need to pay off the balance for a set period of time. in this way, you can pay down your credit card debt as soon as possible without paying a single penny towards interest. However, make sure to check all the terms & conditions to take advantage of the 0% APR period. Otherwise, you will be paying a higher interest rate when the promotional APR period ends. When you pay down your debts faster, it improves your credit utilization ratio that improves your credit score indirectly.
Ask for Higher Credit Limits
Whenever you apply for a new credit card, ask the issuer for a high credit limit. When you are allowed a high credit limit and your credit utilization ratio remains low, it improves your credit score. If your current card has a lower limit and your expenses are growing gradually, you should ask the card provider to increase your credit limit so you can manage your expenses easily without using all your available limits.
Aim for 30% Credit Utilization or Less
Credit utilization is all about using a portion of your available credit limit for a set period of time (usually a month). Experts recommend credit card users stick with 30% or lower credit utilization to keep building good credit. Since credit utilization is another important factor in calculating a credit score, you must maintain 30% or lower credit utilization every month. On-time bill payment is a great idea to keep your credit utilization in check. If you can afford to pay off your balance in full every month, you can cross the limit of 30%. If you are using a credit card just for building or improving your credit score, get the best credit card on better repayment terms and use only 10% or less of your total credit limit.
Become an Authorized User
If one of your friends or a family member has a credit card with a higher limit and with good payment history, become an authorized user to use that credit card account. That account will automatically be added to your credit report and the higher limit can help your monthly credit utilization. This is the best way to take advantage of the primary user’s credit and payment history. Some credit card companies issue a separate credit card to an authorized user so the account holder does not have to let the other user use his card.
Conclusion
Improving credit scores should be an important goal for everyone as a good credit score can help somewhere in practical life. Whether you want to apply for a personal loan, seeking a rental property, or just want to buy an insurance plan at a better rate, you must have an excellent credit score and a payment history that you can build easily by incorporating above mentioned steps in daily life.
For more information and tips to help you choose the best credit card in NZ, visit our website Credit Cards Compare.
