There are several ways to rapidly increase your credit score. This is very important because you are charged higher interest rates if you have poor credit score. Much money can be saved by enhancing your credit score to reduce interest payments. Moreover, if your credit score is too low, you may not be able to get a loan.
- The first strategy is to pay down your credit card debt because lenders prefer debtors to have a substantial difference between theavailable credit and the credit that has been used. Therefore, if you are able to reduce your balance to a value that is less than 30 percent of the limit, you may be able to substantially improve your credit score. If you have several cards, focus on those which are nearest to their limits.
- The second strategy is related to the first one because you want to ensure that your balance for each of your credit cards is not more than 30 percent. Take note, however, that completely paying the balance every month will have no effect on your credit score.
- The third technique is also related to credit cards but it is much simpler. This involves making sure that your credit limit that has been reported to the company calculating credit scores is not smaller than your actual limit. Again, the principle is that the wider the difference between your credit limit and the amount that you have used, the better your credit score is.
There might be a problem here when the credit card company fails to report your credit limit to the credit bureau in which case the latter will simply assume that your highest balance is your limit. For people who consistently maintain a certain amount of debt, it will seem to the credit bureau that they are almost close to their limits and will have lower credit scores.