Knowing and understanding your personal credit score is the key to establishing a solid financial foundation for your business. Your credit score is a key consideration for investors and lenders, so poor credit can make it difficult to find financing. If your score needs help, don’t despair – there are many ways to improve it.
Here are 7 ways to help you improve your credit score
Make your payments on time
Payment history is one of the most important factors in calculating your credit score. If you have been late or have missed payments on your credit cards or loans, your score will drop, as will your financial reputation. But if you’ve been strapped for money or late in the past, making your payments on time will not only help you pay off your loans, but it will also put your reputation as a borrower in the dark.
Communicate with your lenders
If you’ve been a good customer in the past and are running out this month, call them to see if you can get an extension or make a smaller payment. A lender may be able to make a goodwill adjustment and simply erase this late charge from your account.
Keep your balance low
Capping your credit or bringing it close to your maximum can raise some alerts and damage your credit score. Using only 50% (or less) of your credit limit will not only help you in your score but also give you a financial reserve in case of emergency. It is also a good idea to pay as much credit as you can before applying for a loan.
Do not close your old accounts
After paying a loan or credit card, keep the account open. Closing old accounts hurts your available debt-to-credit ratio. Keep your line of credit open or your old credit cards and use them to make a purchase more or less regularly a few months apart (and make your payment immediately).
Do not apply for more credit than you need
Do not rent a vehicle, or sign for a new credit card or apply for a loan in the same months. Credit companies see this as a sign of financial trouble. Also, be aware of pre-authorized offers, as they too can count against your score.
Avoid unattractive sources of credit
These sources usually have high interest rates and in the case of store credit cards, they can be viewed negatively by the credit bureau and lower your credit score.
Review your credit report
It has been reported by some consumer protection organizations that almost 80% of credit reports contain errors, which can cost you and significantly lower your score. Reviewing your credit report regularly not only alerts you to potential errors but also to credit fraud.