Frugal Living

Improving Your Credit Score In 2021

Many people start the year with goals. If you’re on a mission to improve your financial situation in 2021, achieving a better credit rating is an excellent place to start. In this guide, we’ll explore some simple steps you can take today to increase your credit score in the months ahead.

What is a credit score?

A credit score is a rating, which is used by financial providers and lenders to gauge the level of risk an individual represents. The higher your score, the lower the level of risk. Your rating is calculated based on your financial history and activity. If you’ve taken loans out before and paid them back, you are up to date with mortgage and credit card repayments and you don’t have a lot of debt, there is every chance that your credit score will be high. In most cases, the scale runs to between 700 and 900. If the top rating is 900, a score of 690 is classed as good. If the maximum score is 700, a figure of over 466 is considered good. 

How to improve your credit score in 2021

Improving your credit score is beneficial for several reasons. If you have questions about getting a loan, you’re trying to borrow money, or you’re looking to buy a house, a good credit score will enhance your chances of borrowing on good terms. If your credit score is poor, you may find that applications to take out loans are rejected or that you are offered a loan with high interest rates. If you’ve decided to try and boost your score, how do you qualify for a personal loan? There are several things you can do to try and improve your credit rating. The first is to analyze your credit report so that you know where you’re falling down. The next is to try and settle bills and ensure that you are able to make scheduled repayments. Aim to pay everything on time, and try and make some headway with debts if you’ve been spending on credit cards or store cards. If you can, keep your credit cards in your wallet and only use them if you need money urgently. Limit the number of applications you make. If you have a history of firing off applications for credit or personal loans, this will damage your credit rating. 

Credit scores are influenced by your borrowing history and level of debt, but your financial activity also has a role to play. Somebody who has no debts can also have a low score if they don’t use their accounts very often or they have no track history of borrowing and paying back. If you’re in this situation, try and use your account more frequently and show lenders that you can pay money back. This may mean using a credit card a couple of times per month and transferring the money from your checking account to cover the payment. If you do this, you won’t incur interest fees or debts, but you will be showing lenders that you can be trusted to pay back a loan if you apply for one in the future. 

It’s always positive to start the year with goals. If you have decided that you’re keen to work towards a brighter, more stable financial future, improving your credit score is a key objective. Hopefully, this guide will help you boost your rating in 2021. 

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