Five Ways to Improve your Credit Score

Your credit score is an essential factor in your financial life, as this three-digit number is used by entities to measure the risk of granting credit.

The higher your score, the more likely you are to qualify for loans and credit cards on the most favorable terms, saving you money.

If your credit score is not where you want it, here are some recommendations on how to improve your score:

Honor debts on time

The entity indicates that the debts acquired in the financial system must be fulfilled since falling into default damages the score after the passage of several months of default.

Your credit score is the result of your financial discipline. So always keep your obligations up to date. Paying late negatively affects your credit scores. It is always a good idea to use available resources and tools, such as automatic debits and reminders, to help you pay your obligations. If you are currently behind on a payment, update it. Remember that the Habeas Data Law establishes that the term of permanence of negative data is less if it is updated as soon as possible.

Establish a commitment to pay on amounts owed

If you have an outstanding loan and cannot cover the payment, it is necessary to establish a payment agreement to avoid falling into default. Readjust your debts so that a process that involves collection management is not open.

Don’t Exceed Your Borrowing Capacity

Always keep your credit card and other revolving loan balances low. Credit utilization is another crucial factor in calculating your credit score. Therefore, always keep balances low; this indicates to financial institutions that you know well how to manage your credits.

Acquire loans that you can pay, do not go into debt more than you should, or compromise your credit score as this could harm you in obtaining a new loan, especially in private banking.

Apply for and open new credit obligations only when necessary

Keep in mind that opening many credit lines will probably not improve your credit score, and, conversely, unnecessary credit can hurt your credit score. So plan well when you apply for and open a new credit obligation, lest the extra expenses create debts that are impossible to pay.

Aim for 30 percent or less credit utilization

Credit utilization refers to the percentage of your credit limit that you are currently using. It is the second most important factor in FICO credit score calculations, after payment history. The most straightforward way to keep your credit utilization under control is to pay off your credit card balances in full each month. If you cannot do so consistently, a good rule of thumb is to keep your total outstanding balance at 30% or less of your total credit limit. Then you can work on reducing that to 10% or less, which is considered ideal for improving your credit score.

If you follow these simple and straightforward recommendations, you will definitely see an improvement in your credit score.