Your credit score is one of the most relevant aspects of your financial status when it comes to living independently. It is taken into consideration for everything from the line of credit that you qualify for at a bank to whether or not you will be granted a suitable mortgage so that you can buy your dream home. When you have a low credit score, such things might simply be out of reach.
A low credit score is not a permanent thing, though. There are, in fact, many steps you can take to actively improve your credit score. If you are hoping to apply for a mortgage or finance a new car at some point in the future, you should consider these three methods of improving your credit score.
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1. Pay Off Loans on Time
Loans are useful tools when you require funds quickly. If you, like so many others, have ever been in a situation where you needed a bit of help to bridge your finances between paychecks, then you very likely took out a loan of some sort. Short-term solutions like title loans Abilene TX are viable options when such situations arise. Did you know, though, that these types of loans can also present you with the opportunity to boost your credit score?
Title loans and payday loans are designed to be paid back within shorter periods. This is why they typically come with higher interest rates than a long-term loan. For this reason, by paying your loan off on time and in full, you can help improve your credit score in a matter of months.
2. Use Your Credit Card Strategically
You might think that it sounds counterproductive to use a credit card when you are trying to improve your financial situation. However, a credit card can be a valuable tool in improving your credit score when used wisely. This means using it for small purchases more frequently.
For instance, if you know that it costs roughly $40 to put gas in your car each week, use your credit card to purchase your fuel. Then, pay off that charge as soon as your bill comes through. In this way, you systematically improve your credit score and show lenders that you can pay off the debt promptly. Bear in mind that you should never put more money on your credit card than you can immediately pay off.
3. Keep an Eye on Your Credit Report
The systems that generate credit scores are not completely perfect. In fact, it isn’t unusual for there to be mistakes on your credit report that cause your score to appear lower than it should be.
For example, if you successfully paid off a credit card that you took out with a retailer that you shop with frequently and then closed that account, you need to make sure that your report reflects it. That account might appear as still active on your credit report, a mistake that will be reflected in your credit score.