Having great credit isn’t just a source of pride; it could also improve your financial situation significantly. And there are plenty of good reasons to want to increase your credit score in time for the New Year.
On the one hand, you may be hoping to buy a home in 2022. If so, you’ll need a good credit rating to qualify for a mortgage – and a great credit rating to qualify for a mortgage. get an affordable interest rate on this home loan.
Having good credit could also allow you to benefit from the best credit card deals. And whether you have to buy a car or take out a personal loan, your credit score could be the difference between paying less interest on the money you borrow or a lot more.
Now, if you think it’s too late to increase your credit score before the end of the current year, think again. These steps could lead to a rapid increase in your credit score, which will stand you in good stead in the coming year.
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1. Pay off some of the credit card debt
An important factor that goes into calculating your credit score is your credit utilization rate. This ratio measures how much of your total spending limit is on all of your credit cards that you use at the same time. Too high a ratio can lower your score, so if you pay off some of your credit card debt – say, with the year-end bonus you get from your employer – your score might just go up.
2. Get your credit limit increased
If you are up to date on all of your credit card payments and have had an account in good standing for a while, you may be able to pick up the phone, request a credit limit increase, and get this accepted. demand. Once this happens, your credit score might improve.
How it works? We just talked about using credit and how a lower ratio could boost your score. But paying off existing debt isn’t the only way to help bring that ratio back into more favorable territory. If you increase your credit limit, you will achieve a similar goal: a lower usage rate.
Not convinced? Imagine you owe $ 4,000 on a pile of credit cards with a total spending limit of $ 10,000. This is a 40% utilization ratio, while a 30% ratio is preferable and could improve your credit score. If you pay off $ 1,000 in debt, you will fall to that 30% threshold. But if you increase your credit limit to $ 13,400, you’ll have a similar usage rate even if you fail to pay off a dime of your debt.
3. Correct any mistakes on your credit report
Many consumers are shocked to learn that credit report errors are quite common. But some mistakes can lead to damage you don’t deserve. And so correcting these mistakes could lead to a rapid increase in the credit score.
Imagine that you are listed as overdue on a loan that you have never taken out. It could be that someone with a similar name or Social Security number took out this loan and it was accidentally reported as part of your credit history. If you manage to resolve this issue, your credit score could increase.
End the year in style
Even though it’s November already, it’s not too late to increase your credit score in time for 2022. These steps could be your ticket to better credit – and more borrowing options in the news. year.