Improving Your Credit Score – How to Get a Better Rate on Loans and Lines of Credit

15 March 2023

Improving your credit score can lead to better rates on loans and lines of credit, as well as make it simpler to be approved for other services like rental housing or car insurance. Lenders usually base their decisions on payment history, how much you owe, and the types of credit available to you.

Paying your bills on time is the single most important step you can take to boost your credit score. Late payments, particularly those that are 30 days or more past due, have a major effect on your score; even one late payment could lower it by 90 to 110 points.

Set up automatic drafts, calendar reminders or alerts to ensure your bills are paid on time each month. Doing this helps avoid late fees and keeps your credit utilization low – another important component of credit score.

Reduce your credit card balances by paying them off as quickly as possible. This can be accomplished either by using funds from personal resources to cover the full balance, or finding a family member or friend with good credit who would be willing to add you as an authorized user to their account.

According to FICO, keeping your outstanding balance below 30% of your total credit limit is recommended. This level is considered either “good” or “excellent” credit utilization.

To reach this goal, it is necessary to establish a budget and practice discipline when spending. While this may be challenging in the short term, it’s an integral component of reaching long-term financial stability and raising your credit score.

If you don’t have any recurring debt, it may be possible to strengthen your credit file by requesting positive payment history from utilities or cellphone companies. Doing this may help boost your score in the short term as it demonstrates that you can be responsible with managing your finances.

Requesting a higher credit limit is another way to improve your credit utilization and can have an immediate effect on your score. Most credit card companies provide this service, which you can request online or over the phone with ease.

Don’t open too many new accounts at once, as this can negatively impact your credit utilization ratio and score. If you do need multiple new accounts, take time to shop around for the lowest interest rates and apply only after receiving approval.

According to TheMortgageBanker’s experts, aim for a revolving credit balance under 30% of your overall credit limit. This is considered an ideal level of credit utilization since it implies you only use it when necessary.

Maintaining a low credit utilization can be advantageous for various reasons, such as saving money on interest. The faster you pay off your balances, the faster your credit score will improve.