Sales POP - Purveyors of Propserity
5 Tips on Building and Protecting Your Credit Score
Blog / Marketing / Mar 20, 2024 / Posted by Sales POP Guest Post / 16

5 Tips on Building and Protecting Your Credit Score

0 comments

Having a healthy credit score is more important than ever nowadays. It’s a vital factor that increases your chance of owning homes, buying cars, and even landing jobs. But you’re not alone if you’re confused by the figures that constitute a credit score.

Many individuals, especially young adults, still are unaware of how to build and protect their credit standing. That’s why we’ve listed five essential tips below to build and shield your credit score as if it were your most valuable asset. These tips will guide you toward a future of financial freedom.

Get A Personal Loan

Many people will raise a brow when they read this first tip. However, getting a personal loan is one way to build credit from nothing as long as you pay it on time until your loan matures.

When building a credit score through a personal loan, ensure the lending company will report your good payment history to the credit bureaus. It’s also advised to acquire a secured personal loan as it is the loan option that will likely be approved since you still don’t have a credit score.

A secured loan is a loan that is backed with collateral. You can offer your assets, such as property or vehicle, as collateral for your secured personal loan.

Moreover, it’s also recommended to consider getting your secured loan from online lenders like CreditNinja, as they are less strict than traditional banks and lenders. Lastly, remember only to borrow an amount you can easily repay. Your objective here is to build your credit score, and borrowing more than what you can afford can do otherwise.

Pay Your Bills on Time

Aside from paying your existing loans and credits on time, paying your bills on time will also help build your credit score.

On-time bill payments are key in calculating your credit score, accounting for about 35% of the total score. When you pay your bills before or by the due date, credit reporting agencies take this as a sign of reliability and financial responsibility.

Regularly meeting your financial obligations avoids late fees and penalties and builds a positive payment history. This consistency over time can lead to an enhanced perception of credit stability, making creditors more likely to extend favorable credit terms or lower interest rates, and it can also open the door to higher credit lines.

Keep Credit Utilization Low

Understanding credit utilization is key to maintaining a healthy credit score. Credit utilization refers to the percentage of your total available credit that you’re currently using. For instance, if you have a credit card with a $10,000 limit and you’ve charged $2,000, your credit utilization for that card is 20%.

Most financial experts recommend keeping your utilization below 30% on each card and across all accounts. It’s not just a random figure; it’s a threshold that credit rating agencies consider when assessing your creditworthiness. Consistently maintaining a low credit utilization ratio signals to creditors that you’re a responsible borrower who manages debt well.

A high ratio can suggest you’re over-reliant on credit, which may be a red flag for future lenders. On the other hand, low credit utilization contributes positively to your credit score and can increase the likelihood of receiving better terms on loans and credit in the future.

Limit Credit Inquiries

When you’re building a strong credit score, every factor counts, including the number of credit inquiries on your report. Each time you apply for credit, a hard inquiry is noted, potentially causing a slight dip in your score. Although these deductions are small, they can accumulate.

Limiting the number of times you apply for credit is a strategic way to avoid these small dents. Too many inquiries in a short period may signal to lenders that you’re a high-risk borrower.

You can maintain a cleaner credit report by spacing out credit applications and seeking credit only when necessary. Remember, good things come to those who wait, particularly when nurturing a strong credit score.

Diversify Your Credit Mix

Diversifying your credit mix is another way that can positively impact your credit health. Credit scoring bureaus consider the types of credit accounts you have, whether revolving credit like credit cards or installment loans such as personal or payday loans.

Having a variety of credit accounts demonstrates to lenders that you can manage different types of credit responsibly. It adds dimension to your credit report and can make you more appealing to lenders, potentially leading to more favorable interest rates and loan terms.

When calculating your credit score, the credit mix accounts for about 10% of your FICO score. Although it’s not a heavily weighted factor, it can still help you improve your credit score.

However, you should keep in mind that it’s essential to find a balance. While diversifying is beneficial, remember that opening too many accounts, especially in a short period, can have a negative impact due to complex inquiries and the potential to rack up debt. Therefore, deliberate choices about diversifying are crucial.

Conclusion

Your credit score is a reflection of your financial reliability. Maintaining and protecting it requires consistent effort and smart financial habits. By following the five tips mentioned above, you’ll be on your way to achieving and maintaining a healthy credit score.

About Author

These are Sales POP! guest blog posts that we thought might be interesting and insightful for our readers. Please email contributor@salespop.net with any questions.

Comments

..
..
.
Sales Process Automation
.
This website uses cookies. By continuing to use this website you are giving consent to cookies being used. For information on cookies and how you can disable them, visit our privacy and cookie policy.