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February 28, 2024
Business Finance

How to Improve Your Credit Score

does it hurt your credit to apply for a credit card

Are you worried about your low credit score? There are ways to get it up quickly. Usually, people with low scores can tack on around 100 points quickly. Many people wonder if that is realistic. If your score is in the bad credit rating area, you could easily see this increase by following some of the tips below. People with better credit scores will not be able to get such a dramatic increase.

1. Strategically Pay Credit Card Balances

Your credit utilization is the segment of your total credit limit that’s used at any given time. A good guideline is to use less than 30% of your limit. Make sure that your balance is low when it’s reported to the credit bureaus to see an increase in your score.

2. Ask for a Credit Limit Increase

Your credit limit increase can also lower overall credit utilization, which increases your chances of obtaining a higher score. To gain the most out of your credit limit increase, contact the card issuer to see if they can offer you a higher limit. Raising your limit can help you lower overall credit utilization.

3. Become an Authorized User of Another Card

If a friend or relative has a high credit limit and good payment history, consider becoming an authorized user. This will help scale your credit score and provide the account with enough information to improve it. Before trying this out, be sure the card gets reported to the major credit reporting agencies.

4. Pay Bills On Time

No strategy will work as effectively to increase your score as consistently paying your bills before their due dates. Late payments negatively affect your score. If you regularly miss a payment, contact the creditor and ask them to stop reporting the missed payments. Doing so will help improve your score and avoid getting marked as delinquent.

5. Dispute Errors on Credit Report

Mistakes reported on your credit reports can harm your score. If you find any discrepancies, dispute them with the credit agency right away. You are entitled to free reports from the three major credit reporting agencies. By checking your credit reports, you can identify any mistakes and get a better idea of how old some of the information is.

6. Deal With Your Collection Accounts

Dealing with a collection account can help you avoid getting sued over debts and can help raise your score. You might be able to get them to stop reporting the account once you pay it. The effect of unpaid debts on your score depends on the model used to create it. For instance, the FICO 8 model considers paid collections as part of your credit history.

7. Use Secured Credit Cards

A secured credit card is another way to rebuild or improve your credit. It’s typically backed by a cash deposit, and it uses the same amount as your credit limit. A secured card that reports to three major credit bureaus are a good way to improve your score.

Why Avoiding a Bad Credit is Important

So, does it hurt your credit to apply for a credit card? According to the experts at SoFi, “Applying for credit cards is not something you should take lightly because it absolutely can hurt your credit score.”

You don’t have to suffer from a bad credit score forever. Follow some of these listed tips to get a big improvement in your score.

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