Last Updated on May 20, 2021 by MoneyVisual
We have all heard about the importance of having a good credit score, and whether you are hoping to purchase a property one day with the help of a mortgage loan, or be approved for vehicle finance, building a credit score is essential. However, if you are unsure of how to get started building your credit score, you should consider the following methods.
You Need Credit
Oddly enough, it would be best if you had credit and debt to build your credit score. Your credits and debts will serve as a credit record; showing payment frequency, reliability, and other factors. Therefore, regardless of what your annual income is, you won’t have a good credit score without debts and accounts.
What’s more, it may be somewhat tricky to find an approval for credit without any current liabilities, which is why you may want to consider getting a payday loan to start building your credit record. Most payday loans are considered plausible options for individuals with poor crest history.
Once you have some available credit and some debts, you should manage repayments with frequency. More often than not, smaller micropayments throughout the month enhance credit scores more than one larger payment would. The effort will also help keep credit card balances down and effectively keep you out of debt.
Increase Credit Limits
Microloans and low credit limits often come with the disadvantage of a higher interest rate. Therefore, requesting a credit limit increase on your accounts will reduce your total spend on repayments. In addition to this, your credit score will also rise as your record will show boosted responsibilities rather than stagnating ones. Some lenders provide the option of being automatically assessed yearly for a credit limit increase, which means you won’t need to enquire.
Savings on Hand
Most banks influence your credit score by assessing your general income usage. Therefore, having savings on hand means you will be classified as an individual with funds available. Your bank will be more likely to approve credit cards, larger loans, and vehicle finance as you will be less likely to have problems meeting repayment requirements if you have a savings account on your portfolio.
Your credit score is also dependant on how you manage your debts. If you have a financial obligation that has been neglected for some time, it is a good idea to consider consolidating with a loan as this will show as a paid debt. Discovering how your credit score is calculated will also help you find additional methods of building a good score.
Once you notice your credit score is stagnating for a few months, it is probably wise to consider applying for an additional account or closing off a current debt to add positivity to your record.
How you manage your debts will influence your score monthly. It is also essential to keep in mind that applying at multiple lenders within one month will decrease your score. Therefore, applications should be planned and carefully filled out to ensure approval.