Although many people are aware of their credit score, they often fail to maintain a good score as they don’t understand the importance of having one. Having a good credit score can grant you access to many benefits. The average credit score in America is 698 among all credit score ranges. It’s not bad by any means, but it’s not great either. To be in great financial shape, a credit score of 750 is essential.
So, what if we tell you that you can increase your credit score by 100 to 300 points in just a few months? Would you believe that? Well, this article is written just for that.
In this article, we have shared 5 simple ways you increase your credit score in just a few months. But before we get into them, let’s take a look at some benefits of having a good credit score.
Benefits of having a credit score of 750 or more
- Lower interest rates on loans and credit cards
- Better rates for health insurance
- No security deposits for utility services
- Access to cell phones on contract without any security deposit
- Easier approval for housing options
- More negotiating power
- And better life overall
1. Set debt payment goals and follow them
Consumer debt and credit scores are at the opposite end of each other. Not having the debt paid on time can have a significant impact on your credit score. It can also force you to pay penalty fees. The only way to avoid this is by paying all your debt on time without any excuse.
You need to create a debt settlement plan and stick to it. While you are executing this plan, do not acquire any new debt. Don’t buy anything expensive unless you absolutely have to. Use a budgeting tool to find the areas where you can save on your expenses.
Now, tacking these debt payments isn’t always easy, and sometimes, it can even be impossible, but following these tips can make a difference.
Here are some tips you can follow to pay the debt on time:
- Track your spending and find areas to cut back
- Prepare a budget that focuses on debt payoffs
- Reduce your monthly expenses
- Stop buying things you want and only focus on things you need
- Create a source of side income
Following these tips and sticking to them will help you pay off your debt on time. Once you have managed your debt, you can easily reach a credit score of 750 or higher.
2. Avoid taking too much debt at once
Avoid taking too much debt at the same time. Otherwise, you’ll end up in a ferocious debt trap. Always pay off your previous debt, loans before taking any new ones. This will prevent your credit score from getting pummeled.
Let’s see an example. You have got a new job that pays you well. You are thinking of buying a new car. That’s not so bad. However, you also buy a new home, use credit cards to buy appliances, and take up a personal loan to help your parents. Boom! Now you are in a massive debt trap that could take years (if not decades) to climb out.
Taking multiple loans at once and then not being able to pay them off can have a negative impact, and your score will only end up falling further. However, paying off all the existing debt timely can boost your credit score. As a thumb rule, it is wise not to acquire debt without a repayment plan.
Follow these strategies to avoid getting into debt:
- Never buy something you know you can’t afford
- Always have an emergency fund in place
- Avoid raking up debt in many credit cards
If you are struggling with overwhelming debt, get a free debt relief consultation today!
3. Except for emergencies, don’t use your credit card
You should not use a credit card for everything. Excessive use of credit cards can create a vicious cycle, in which, you might not be able to pay off your existing debt which will then carry over to the next month or even months.
When you are not able to pay off your credit card bills, you will face huge interest charges (many banks charge 36% APY or higher), late fees, and other penalties. Without you even realizing it, this will seriously mess up your financial life and bring down your credit score.
Therefore, stop using credit cards at all except for emergencies. This way, your card won’t have to suffer from continuous debt, and hence your credit score will become more stable.
Here’s how you can stop using your credit cards:
- Transfer your remaining credit card balance
- Do not hold more than two credit cards at the same time
- Develop the habit of paying with cash for regular monthly expenses
- Use prepaid credit cards to ensure you don’t go over your available limit
- Reward yourself for reducing credit card use
Credit cards are great tools to build credit. However, if you cannot manage it properly, it is better to avoid their usage. Managing your credit card well can help you attach a credit score of 750 easily.
4. Customize your credit limit
Yes, your credit utilization ratio does have an impact on your credit score. Restricting your credit usage per allocated limit can boost your credit score further. In general terms, it is always better to keep your utilization under 30%. However, if you reach the limit and still try to buy stuff with it, then your credit score will fall radically.
To make sure that this doesn’t affect your credit score, you can get an increase in your credit limit. You must talk to your credit card lender and ask for customization of your credit limit according to your expenses.
There is a small catch here. Your bank doesn’t just increase your credit limit if you already have poor repayment history. To negotiate a limit increase, you must have repaid your bills on time and showed regular usage of credit cards.
If you detect a patter of higher spending with your credit card, you can ask for a limit increase before it is too late. Don’t let higher utilization ruin your credit score. If you can’t get your limits raised, you need to stick with spending within your always.
This way, you can avoid lowering your score below the 750 mark.
5. Get professional help when required
Many times people suffer from low credit scores because they are clueless about how to manage their credit. If you are struggling with this issue, you can seek professional help to let them do the heavy lifting for you.
There are several credit monitoring agencies that can actively track your score and warn you when things start going sideways. They charge only a nominal fee to not just track your score, but also provide you with great suggestions on how to improve it.
If you are struggling to get your credit score boosted, you can check with a service like Credit Money to track, fix the errors, and boost your score within a few months.
Improve life with a good credit score
From getting a new loan to renting an apartment, your credit score plays a big role in how you live your life. If your credit score is a mess, it indicates that your financial life is in a mess. You don’t ever want that. A credit score of 750 or higher indicates that you are in great financial shape. So, you must rebuild it to reach at least this level.
Use the strategies we have discussed in this article to easily increase your credit score in a few months. Remember, consistency is the key here. Just make sure to stick to these ideas so that you can have the highest credit score possible.
Don’t forget to download our FREE personal finance toolkit that can help you identify the best tools you can use to manage your wealth!