How to Improve Your Credit Score

Your credit score is an essential indicator of your financial health. It shows lenders at a glance how responsibly you deal with loans. The highest credit score helps to get approval for new loans or credit lines and the lowest interest rates available when you take out a loan. If you're looking to fix your credit score, there are several quick and easy things you can do. It may take a few months to improve your credit score, but you can fix your credit score in just a few hours. How can I benefit from improving my credit score? A higher credit score means companies see you as a lower risk, making you more likely to be approved for credit. This is because a high score indicates a history of responsible credit management, e.g., timely repayments.

The benefits of fixing your credit may include:

  • Better chances for a credit card, mortgage, and loan approvals

A higher credit score means you have a higher chance of approved loan, credit card, or mortgage. You will have the possibility to choose from a broader range of loan offers and providers that can help you save money.

  • Lower interest rates

If lenders think you have less risk, they may offer you better interest rates on loans and credit cards, making borrowing cheaper. Good credit improves chances of being approved for a low-interest loan or 0% donation card, for example.

  • Better car insurance rates

If you spread insurance costs over a year, your credit rating may affect the interest charges you pay on top of your insurance premium.

  • Higher Credit Limits

As you improve your score, you should have a better chance of borrowing significant amounts. This will help you achieve goals faster, such as buying a new car or doing home renovations.

How to fix your credit score?

The steps to repair your credit score can vary depending on your credit situation. But here are some universal things to consider that can help almost anyone improve their credit score:

  • Check your credit reports. If you're looking to fix your credit score, an excellent first step is to get your credit reports checked by all three national credit reporting agencies. After making sure there are no inaccuracies, identity theft, or fraud signs, check to see if there are unpaid balances or accounts that have been collected. It's a good idea to address this negative information first by paying off as much old debt as possible.

  • Pay on time. Paying off your debts on time is the best thing you can do to improve your credit score. Payment history is essential to your credit score, so avoiding late payments is essential. If you're having trouble making payments timely, consider using automatic payments for your accounts or setting up notifications to remind you to pay.

  • Keep your credit utilization rate low. As mentioned above, keeping your credit utilization rate at or below 30% is usually best. Aside from reducing your spending, you can lower your usage rate by asking your credit card company for a credit limit increase.

  • The limit applies to new accounts. Applying for new lines of credit usually results in a tricky request, which can negatively impact your credit score. If you want to fix your score, try limiting applying for new accounts. Opening a new line of credit decreases your credit history's average age or length.

  • Keep old accounts open. When fixing your score, don't close old accounts that have been cashed out, even if you no longer use them. Keeping the accounts open helps maintain the length of your credit history.

Four tips for a healthy credit rating

  • Limit loan applications.

No matter what credit you apply for or how much you want to borrow—each application will record a complex search on your report for businesses to see. So try to spread out all loan applications - a good rule of thumb is no more than once every three months, but remember that lenders' criteria can vary. If you apply for credit frequently in a short period, lenders may believe you are over-reliant on credit and therefore take a higher risk.

  • Avoid defaulted accounts.

Defaulted accounts usually occur when your relationship with the company has broken down, usually because you missed several expected payments. Failed accounts can have a significant impact on your credit score.

  • Only borrow what you can afford.

Getting into trouble with debt can lead to things like County Court Judgments (CCJ), Individual Voluntary Agreements (IVA), or even bankruptcy. These things stay on the credit history for at least six years and significantly negatively impact your credit score. 

  • Watch for scammers.

Investigating your credit report and looking for signs of fraudulent activity can help protect your credit score. If you see an increase in the amount owed or claims you have not submitted, you may be a victim of fraud. If you are a fraud victim, your lenders should quickly fix any damage to your credit report once they investigate and establish the facts. Contact professionals if you need help fixing your credit score report for fraud.

How long does it take to fix your credit score?

There is no set minimum, maximum, or average score by which your credit score will improve each month, and there is no set score that you will receive with each action. How long it takes to fix your credit depends on your low credit score. If the main downside to your credit score is credit utilization and you pay off your balances, your credit score can improve drastically in a month. If your balance is low due to multiple collections and poor payment history, it will take several months of timely payments to see a positive shift in your score.