There are many factors that contribute to a high credit score, such as on-time payments, low credit card balances, and a diverse mix of older and new credit accounts. But, there are some things that can lower your score like late or missed payments and collections. There are ways you can improve your credit score for free.
Paying on time
It is crucial to make timely payments in order to build a credit score. FICO states that your payment history is responsible for about 35% of your credit score. It is important to pay at least the minimum on all your bills. If possible, you should make more each month.
History of payments
One of the most influential factors in your credit score is your payment history. In fact, it accounts for 35% of your total score. Your payment history tells lenders how likely you are to make payments on time. It is the most important aspect of your credit report, so it is important to pay your bills on time. Even a few late payments won't ruin your credit score so make an effort not to.
Credit utilization ratio
First, you must know how to calculate credit utilization. The credit utilization ratio, which is the sum of all credit used and all credit available to you, is your total credit usage. This ratio will determine how debt-management is done. A credit utilization ratio of less than 30% is the best.
Diversifying your credit mix
One of the best ways to improve your credit score is to diversify your credit mix. It is important to maintain a healthy credit mix. However, it is also crucial to not over-utilize your credit. A healthy credit mix should consist of both installment loans, and revolving funds.
Get quick loans
These loans can be used to assist you in an emergency situation. You may need to wait a few days to get the money you need. These loans are less risky than unsecured loans which can take several weeks to be approved. You can also borrow money from a family member or friend. While this method is less expensive than traditional loans, it is faster. Just remember that you will have to sign a loan agreement. Also, you should have an emergency fund in place so you can quickly borrow the money you need.
Charging for collection or charge-offs
Credit score can be negatively affected by charges-offs. Generally, they stay on your credit report for seven years. You can rebuild your credit and get back a good credit score. While these steps are not quick, they can have a significant impact on your credit report.