If your credit score isn’t as good as you hoped, you’re not alone in feeling anxiety over trying to impove. But with consistent effort and a clear strategy, you can gradually enhance it and alleviate the anxiety associated with it. Here are some practical steps you can take to improve your credit score:
1. Review Your Credit Report: Start by obtaining a copy of your credit report from one of the major credit reporting agencies in your country. This will allow you to see exactly what is impacting your credit score. You might be surprised to learn that sometimes there can be factual inaccuracies present due to attempted identity theft and fraudulent accounts. Anything that isn’t right - immediately report it to the agency to have it amended.
2. Make Payments on Time: Your payment history is a significant factor in your credit score. Ensure that you pay all your bills on time, including credit cards, loans, and even utility bills if they report to credit bureaus. Setting up automatic payments can help reduce the risk of forgetting due dates.
3. Reduce Debt and Keep Balances Low: High credit utilisation (the ratio of your credit card balances to their limits) can negatively affect your credit score. Try to keep your utilization below 30% of your total credit limit. Pay down balances, and avoid accumulating debt on high-interest credit cards.
4. Avoid Opening New Credit Accounts Too Frequently: Many people may not be aware that each time you apply for credit, a hard inquiry is made, which can temporarily lower your credit score. Opening many new accounts in a short period can also signal risk to lenders. Focus on managing your existing credit well rather than continuously adding new accounts.
5. Keep Old Credit Accounts Open: The length of your credit history impacts your score, with longer credit histories generally seen as less risky. Keep older accounts open, even if you’re not using them, as long as they do not cost you money in annual fees.
6. Diversify Your Credit Mix: If possible, consider having a mix of different types of credit accounts, such as a credit card, an auto loan, or a personal loan. A diverse credit portfolio can positively affect your score, showing that you can handle various types of credit responsibly.
7. Monitor Your Credit Regularly: Regular monitoring can help you understand how your actions affect your score and allow you to adjust your financial behaviours accordingly. Many credit card issuers and financial websites offer free credit score updates and tracking, which can help you see progress and stay motivated.
8. Be Patient and Persistent: Improving your credit score is a gradual process. Positive changes in behaviour will take time to reflect in your score, especially if you are recovering from previous financial mistakes.
By following these steps, you can start to take control of your financial health, reduce your anxiety, and improve your credit score. Remember, each small step can lead to significant improvements over time.