7 Simple Ways to Improve Your Credit Score, Essay Example

The initial reaction to the credit report generated was a sense of relief. This is largely owing to the fact that I had never generated or seen my credit rating before. Understanding the importance of this rating as a future professional, it was helpful to find out my credit rating was far above the average individual’s. The most surprising element of the credit score was the collections report. This essentially depicted any of my accounts that went into collections. Since I did not have any, it played a big role in my positive credit rating.

One element that would significantly have a positive impact on my credit score would be my credit card. I endeavor to maintain a relatively sensible and good balance by using the card only when necessary. This economic use of the card enables for a good spending culture. Since it is an open card, it is integral to maintaining a positive balance that I pay-off the card in a timely manner. This helps to depict a responsible and consistent effort to successfully manage finances, allowing lenders to develop trust.

One element in my report that may potentially havea negative impact on my credit score are my student loans. Payment of this loans is made on the minimum required monthly basis. The student loans are currently in forbearance allowing me to avoid default by reducing the periodic payments that I make to the lender. In case of default, this would negatively impact my credit score.

There are numerous ways I could improve my credit score. The following five-point plan may potentially boost my credit score significantly.

1. Under-use Credit Cards: maintaining a good balance on my credit cards has been the pivot of my positive credit rating. Regular and timely payments of bills has complemented these efforts by maintaining the balance at a manageable levels. However, to further boost the credit score, under-using the credit card would essentially supplement these efforts. I would ideally maintain a 10% utilization of the credit available on the card to significantly increase my FICO scores(My FICO, 2014).
2. Raise Credit Limit: since I have managed to maintain a relatively good balance on the credit card so far, under-using my credit card would be further enhanced by increasing my credit score. By having a considerably larger credit limit while under-using this credit, ideally 10% or less, my credit worthiness significantly increases allowing for a better credit score.
3. Payment History

A positive credit history includes one in which payments are made in full and on time. Payment history comprises 35% of one’s credit score. Once consistent income is secured, one can make payments to reduce and eliminate debts shown on a credit report, though they may be delinquent (Bank Rate, 2014). This action will improve said credit score.

On time payments on a given loan/account will improve a credit score. If lenders are contacted in advance regarding an inability to submit a payment on time, some will make an arrangement with the borrower that will not affect the credit score

4. Amounts Owed

30% of your credit score is weighted by the amount of money owed. Lenders consider your available line of credit as it relates to how much you can borrow with the ability to pay back in full.

The most important action to take to improve your credit score is to reduce the amount of debt you owe. Also, keeping any revolving credit balances low, such as credit card debts, will promote improvement. It is helpful to close or reduce any lines of credit that are unused.  Be mindful of making any major changes within a short span of time, which could have an adverse effect on your credit score.

Medical Loans

I have managed to maintain a healthy lifestyle by watching my diet and frequently exercising, allowing me to maintain near zero medical loans. Having no medical loans depicts a positive lifestyle that enables lenders to trust one’s spending and use of financial resources availed by lenders.

School Loans

My student loans are currently in forbearance, allowing me to avoid defaulting on payments. This has solidified my credit rating by showing lenders the level of credit I can manage at a time.

Car Loans

I have managed to maintain zero car loans by effectively utilizing public transport to conduct my day-to-day activities. This significantly improves and solidifies my credit score.

Employment Opportunities

I have recently managed to gain short-term employment opportunities that have allowed me to successfully reduce my levels of debt. This has been supplemented by dance opportunities that have allowed me to maintain a good balance on my credit card by directing income to payment of my credit card balance.

References

Bank Rate. (2014, September 1). 7 simple ways to improve your credit score. Retrieved from Bank Rate: http://www.bankrate.com/finance/debt/7-simple-ways-improve-credit-score-2.aspx

InCharge Education Foundation, Inc. (2006). CreditBooster ultimate guide to a better credit score : unlock the mysteries of your credit report and improve your score. Orlando: InCharge Education Foundation, Inc.

My FICO. (2014, March 10). How to repair my credit and improve my FICO credit score. Retrieved from My FICO: http://www.myfico.com/crediteducation/improveyourscore.aspx

Weston, L. P. (2012). Your credit score : how to improve the 3-digit number that shapes your financial future. Upper Saddle River: FT Press.