A good credit score shows lenders how responsible you are with borrowing and paying back money, as when you have a high credit score, banks and lenders see you as trustworthy. This means they’re more likely to give you loans, cards and mortgages with lower interest rates, and so if and when you need to borrow money you’ll get the best deals. A good credit score can open doors to better opportunities for things you want to do in your life from buying a house or starting a business, and generally save you money in your day to day spending too. If you’re just starting out and have no credit history, or you need to repair your credit score, here’s how you can go about it.
Diversify Your Credit Mix
A mix of credit types is beneficial, this includes having things like credit cards, mortgages, car loans and even personal loans. A well-rounded credit mix shows your ability to manage various types of credit responsibly which can have a positive impact on your score. Don’t just take out cards and loans for the sake of it and don’t borrow more than you can afford as things can quickly spiral. But as and when you need to borrow money, use a mix of different types of accounts as it will benefit your credit score.
Master Credit Utilisation
Credit utilisation is so important, it’s not just about keeping your balances low. It’s about finding the sweet spot between utilisation and available credit- most experts recommend keeping your credit utilisation below 30% to maintain a healthy score. However, the ideal range is often even lower- around 10-20%. By doing this, you also make sure that you’re keeping your repayments manageable and not letting your spending spiral.
Time Your Payments Right
Paying off a significant portion of your balance just before the statement date can lead to a lower reported balance, which in turn improves your credit utilisation ratio. This simple trick can give your credit score a nice boost.
Keep Old Accounts Open
Closing old credit accounts might seem like a way to manage your financial life, but it can actually hurt your credit score. Older accounts can be a big asset because they demonstrate your long term creditworthiness. Instead of closing old accounts, keep them open (especially if they have no annual fees) and just use them occasionally to keep them active.
Use the Right Tools
Using technology and money tools is a great way to manage your money. Budget tracking apps and financial stress tests are like practice runs, where you imagine tough situations like losing your job or dealing with unexpected expenses to see how well you’d handle them. This helps you make better choices so you’re ready for anything. Your own banking app can be really useful too if you use it correctly, it can send you alerts when you spend too much, pay your bills automatically and save small amounts from your purchases. These tools make managing money easier so you can be in control and feel more secure about your finances.
Monitor for Errors
Mistakes can have a negative impact on your credit score. Regularly review your credit reports and if you find any errors, take action to dispute them. A clean and accurate credit report is essential for maintaining a high credit score.
Stanley
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