How to Improve Credit Score & Consolidate Debt

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When applying for insurance or a loan, it is often recommended that you have good credit in score in order to obtain a good deal. However, how does someone get a good credit score? There are many different ways to do so, some of which will be explained below.

How are Credit Scores Calculated?

A mathematical algorithm is applied to the information in your credit reports. Most factors that are being considered are your payment history on loans, credit cards and bills, your revolving credit, the types of your accounts, and the frequency in which you apply for new credit. You can check your credit score by going online and logging into your financial institution.

Pay Bills on Time

Probably the most important way that you could improve your credit score is simply by paying your bills on time. Lenders will be reviewing your credit report so that they can see how reliable you are at paying money that you owe. Paying late, or not sending sufficient payment can result in your credit score decreasing. This includes utility bills, rent, credit cards, and loans. Paying on time will also save you interest, which is usually added on top of late payments.

Keep Credit Card Debt Low

When calculating your credit score, lenders use the credit utilization ratio, among others. This ratio works by adding all your credit card balances and dividing it by your total credit limit. The higher the ratio, the worse, as it implies that you purchase a lot on credit, near the top of your limit. Lenders would prefer to see a rate of 30% or less. You can achieve this amount by keeping the balances on your credit cards low and paying off all your debt as soon as you can.

Consolidate Debt with 0% APR Credit Cards

If you have existing debt that you are overwhelmed with, one way to reduce your interest rates is by consolidating existing credit card balances on to a 0% APR credit card. There are many options available and if possible, you should try to identify those with low or no balance transfer fees. When many credit cards charge high-interest rates on debt, this can help you get your finances back under control without a 20% or more interest rate. Many 0% APR cards provide 12 months or more at a 0% interest, which can help you get back on track without paying a lot of money in interest rates. Some cards are also known as easier to use specifically as balance transfer credit cards.

Keep Unused Credit Accounts

In relation to the point above, if you are not using a credit card, it might be beneficial to leave it open. This is only if you are not being charged a fee to keep it open. Having a balance of zero on this account can help your credit utilization ratio. Only use this method if you already have an unused credit card account, don’t open a new one just to try this.

Avoid Applying for New Credit

If possible, try to avoid applying for new credit very frequently. When you do this, a hard inquiry is created and added to your credit score. If you have too many hard inquiries, it can negatively affect your credit score. However, these will only remain on your score for two years, so the impact will eventually dissipate.

Monitor your Credit Reports

Keeping an eye on the accuracy of your information can help increase your score. You can check this by using a credit reporting bureau. If you see any inaccurate information on your credit reports, report them at once and get them corrected. Having errors on your credit reports can result in an inaccurate score being calculated for you.


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