Boo! Credit Scores Can Be Scary, Fear Not with These 5 Secrets

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Credit Scores can seem scary when you think about how that three-digit number can affect so many financial decisions in your life. Frightening enough, that score can then scare away lenders when you’re applying for a loan or a mortgage. The ones not frightened away give you a horrifying interest rate!

Before you go and hide under your covers, here are 5 ways to calm your fears and improve your credit score.

1. Pay Off Your Balances, Especially Large Ones, Quickly

This pointer might sound obvious, but the sooner you can eliminate your balances, the healthier your credit score will be. If you make a hefty purchase with a credit card, try to pay it off right away, even if you must sell a favorite possession to obtain the funds. When you do so, you might find that your score goes up substantially. Plus, you’ll lower the interest rate you’re paying. At the very least, try to pay down your highest balances to the greatest extent that you can.

If you’ve routinely paid your credit card bills late, don’t fall into despair and assume that punctual payments won’t do you any good now. Instead, start paying those bills on time. Despite your history, your credit score will eventually reflect your newfound effort. What’s more, you’ll get into a good habit.

Remember as well that you can use an online service that will automatically pay your credit card debts each month. Such a tool will ensure that you won’t ever forget one of your bills.

2. Consider a Debt Consolidation Loan

You could speak to a financial expert about taking out a debt consolidation loan. This solution isn’t ideal for everyone, but perhaps you’d benefit from one.

First, you might find it easier to pay off your credit cards by combining the amounts of money you owe to various credit card companies into one sum. It might feel less painful to make a more substantial payment each month rather than a series of smaller payments. Plus, you won’t accidentally overlook a payment that you owe. Even more appealing, your overall interest rate will be lower. And taking out such a loan might soon result in a higher credit score.

3. Bring Your Credit Utilization Ratio Down

Your credit utilization ratio is the portion of your total credit limit that you spend every month. This ratio should be less than 30 percent. Of course, that number might sound low, especially if your limit is less than $1,000.

Keep calculating your credit utilization ratio each month. If you find that it exceeds 30 percent, try to pay more with cash or a debit card. You could also try to make fewer purchases, rely on coupons and discounts more often or start shopping around for less expensive products and services.

Another way to improve your credit utilization ratio is to ask for a higher line of credit. That way, you might not need to reduce your spending rate. If you have any credit cards that will grant such an increase without investigating your credit, consider making this request. Just be certain that none of those companies plan to do a hard credit check; having such an inquiry performed lowers your score a little.

4. Don’t Be Afraid to Use Your Credit Cards

Even though it’s important to keep your credit utilization ratio down, you should still be making regular purchases with all of your credit cards. Spending with your plastic and then making your payments in full is a highly effective way to raise your credit score. By contrast, when you completely avoid taking your credit cards out of your wallet or purse, you’re not doing anything positive for your credit report. And closing one or more of your credit cards could actually hurt your score.

On top of that, using your credit cards might allow you to collect exciting rewards. Possibilities include securing special deals on airfare and hotel stays as well as getting cash back when you buy certain items. Why pass up those goodies?

5. Seek Help from an Outstanding Credit Repair Service

Finally, a dependable credit repair service can help you boost your score and maintain that higher number over the long haul. It can keep careful track of your credit report and identify any mistakes or irregularities that might be unfairly damaging your credit.

The experts who work at such a company could also sit down with the credit card companies and other parties you owe money to. And they might be able to hammer out new agreements that are more lenient and favorable to you.

So there you have it: five financial tricks that can lead to real credit treats. These actions could provide you with the monetary rewards ― including better loan terms and insurance rates ― and the peace of mind that come with a healthy credit report.