The Blog ofThe Gina Sharma Team

Improving Your Credit: How and Why

Whether it be that you’re buying a house, or even a new car, your credit score can make or break your future. In order to improve one’s credit, we must first understand why credit is important. Your credit score allows lenders and banks decide how likely you are to repay your debts and make significant financial decisions. Improving your credit score is an integral part of the process, one that can be taken in simple steps! 

  • The first and most obvious route to improving one’s credit score is to pay your bills and any payments on time (even early!). Your credit score is essentially a measure of financial trust; it’s your job to build that trust through payments. Ensuring paying on time for all of your bills will help positively improve your score. This includes payments including utility bills, cell phone payments, auto loans, student loans, etc! Your payment history is accounted for by about 35% of your credit score. 

  • The next step in solving any problem, is to pinpoint the areas where things are going wrong— the weak spots. Where are the weak points in your credit? Identify your problem areas and work to specifically solve them. Another integral part of this is your amount of debt, which makes up 30% of your score. 

  • Another step in fixing your credit score is regarding the age of your accounts. Creditors like to see record, specifically of your borrowing. The more good records you have of borrowing money, and paying back your debts on time, the better your credit. By utilizing what you borrowed and repaying credit, you are proving yourself to be trustworthy financially; you do so by making yourself a record! 

  • Diversity! The old saying “don’t put all your eggs in one basket” is indeed also applicable to your credit score! By diversifying your record with your credit mix (utility payments, student loans, auto loans, credit cards, etc.), you are improving your credit score, as long as your payments are made on time!

  • Take your time. Diversifying and adding more records to your credit score is a good thing; however, don’t do so in a limited period of time. It may hurt your score if you apply for numerous accounts in a shortened time limit. Improving your credit can be in the long run; in fact, it typically takes 3-6 months for one to rebuild their credit and see a noticeable change. 

The bottom line is that credit score often speaks for itself and helps make financial decisions. In short, they are a financial seesaw, deciding the fate of your borrowing future. It’s integral to improve this score for your loans, credit cars, mortgages, and cell phone plans!