Paying your bills on time is one of the best ways you can improve your credit score. Your credit score is heavily impacted by your payment history more than any other factor. Late payments are often not reported until they're 30 days past due, so it's best to make your payment as soon as possible.
To lower your credit utilization rate, increase your credit limit
To lower your credit utilization, one of the best ways to do so is to increase credit limit. Lenders will consider your income and credit score when deciding to increase credit limits. While some lenders will grant you a higher credit limit based on your credit history over a time period, others will require that you submit a written request. This option can help lower your credit utilization, but it could also cause hard inquiries on your credit score.
A credit monitoring service allows you to monitor your credit utilization. Some credit card issuers will notify you when you reach a certain amount of debt. NerdWallet allows you to view your credit score to assess how it's doing.
Avoid carrying a balance with a secured creditcard
By not having a balance on your secured card, you can improve your credit score. Secured credit cards have low credit limits and high interest rates, but if you use them responsibly, they can raise your credit score. A balance on your credit card can harm your score. Therefore, you should always pay the entire balance each month.
Secured credit cards allow you to build a credit history and build it over time. If you're responsible with your card, you can eventually be granted an unsecured one from the same issuer. Make a few small purchases each month using your card and pay the balance off each month. In the end, if your balance is not paid off, you will pay interest.
Although it may seem daunting, a secured card can improve your credit score in a matter of months. By making your payments on time, the secured card can automatically consider an increase in your credit line. This will give your FICO score a boost and allow you to purchase more. Higher credit scores mean that you are more likely to be approved for an unsecured card.
Reporting default to credit bureaus
If you are in the position of being late on a debt, you should report it to the credit bureaus to improve your score. This can help you raise your credit score quickly. Credit bureaus use your credit score for determining how risky you can lend to. High credit scores can increase your chances of being approved for credit.
There are three major credit agencies: Equifax Experian and TransUnion. Equifax, Experian and TransUnion will report any debt to one of the three major credit reporting agencies. This will not only report your debt but also affect your credit score. These bureaus have different rules, so making sure you check yours thoroughly is extremely important.
Defaults can have a devastating effect on your credit score. Even if the default occurred in recent times, the impact can be more severe. It will remain on credit reports for as long as seven years. Potential lenders will be less likely than ever to extend credit to you due the negative effect of default.