Your credit score impacts what interest rate you could have to pay as well as whether you are eligible for financial items like credit cards and auto loans. A credit score of 500 falls under the category of poor credit. 4% of Americans in 2019 had a score of less than 500.
Many people with poor credit ratings need to learn what is necessary to turn things around. Here are some personal finance tips on how to help yourself improve your credit score as well as better your financial standing.
1. Check Your Credit Report Regularly
Your credit score is one of the most critical numbers in your life. A good credit score can mean the difference between getting approved for a loan and being denied or getting a lower interest rate and having to pay more.
There are a few things you can do to improve your credit score. One is to check your credit report regularly. This way, you can catch any errors or inaccuracies and get them fixed.
Lenders may use a service that automatically pres-scans the credit report, and they identify opportunities for raising the credit score. Click for more information.
2. Pay Your Bills On Time
The first and most important factor in your credit score is payment history—specifically, whether you pay your bills on time. Timely payments demonstrate to lenders that you’re a reliable borrower who is less likely to default on a loan. If you have a history of late or missing payments, your credit score will suffer.
To improve your payment history and credit score, make sure to pay all of your bills on time, every time. Set up automatic payments if necessary to ensure that you never miss a due date.
If you have already missed payments, catching up as soon as possible is crucial. Even one late payment can have a significant negative impact on your score, so it’s essential to make sure that your payments are always timely.
3. Use Credit Cards Responsibly
Credit cards are great for building credit, but only if used responsibly. Use your credit card for everyday purchases like gas and groceries, but be sure to pay off the balance each month to avoid interest charges.
Keep track of your spending. This may seem like a lot of work, but it’s worth it if it means improving your credit score. Moreover, you need to spend only on things you can afford to avoid getting yourself into bad debt.
4. Keep Your Credit Utilization Low
One of the best ways to improve your credit score is to keep your credit utilization low. It is the percentage of your credit limit that you use each month.
Ideally, you should keep it below 30%. This shows lenders that you’re a responsible borrower and can manage your debt.
Raise Your Credit Score by Following These Personal Finance Tips
Using a credit card is a privilege that allows you to readily spend on big purchases which you can pay on an installment basis. However, you need to ensure that you have the best credit score to qualify and be a valued customer.
If you’re looking to improve your credit score, the personal finance tips listed above can surely help. You have to make sure you’re paying your bills on time. Also, you must keep your credit card balances low.
For more personal finance tips, check out the business section of our blog.