The first thing a lender will look at when you apply for a credit card or a new loan is your credit score. Maintaining a good credit score is very important not only for this but it is a gateway to have access to funds you don’t have.
Everyone’s credit history is different. So we cannot give an exact way to boost a credit score. How you’re going to be boosting your credit score is all about your current credit score. If you’re rebuilding your credit score from bad credit, it takes significantly longer than someone with fresh credit. But even with that, you will have easier access to new credit lines.
Although you can boost your credit score by taking out loans, we recommend credit cards. Because you will be able to cover your expenses with a credit card and earn some benefits while doing it, credit cards are the best tool to boost a credit score. Once you set your mind to boosting your credit score, you should avoid using cash whenever you can. Use your credit card for your expenses and try to keep your balance to the lowest point possible. But make sure to spend carefully so you can pay off your balance.
Doing this repeatedly for months on end will surely boost your credit score. You may not see any increase in your overall credit score in the first few months but in about 10 months, you can gain as much as 200 credit score which is going to have a huge value. Since your payment history makes more than one-third of your credit score, paying your balance on a credit card on time is going to increase your credit score.
Calculating Credit Score
Credit scores are calculated by taking into account different measures on your credit account. Your payment history is the biggest factor in your overall FICO credit score which is the type of credit score almost every lender uses. Therefore, you should always take the FICO credit score into account. Other than payment history, the total amount owed is also an important part.
Here is what goes into the computing of your credit score.
| Payment History | 35% |
| Amounts Owed | 30% |
| Length of Credit History | 15% |
| New Credit | 10% |
| Credit Mix | 10% |
Payment History
Measures how responsible you are for making your credit payments on time.
Amounts Owed
Shows the total amount of credit you owe and available credit line.
Length of Credit History
The longer your credit history is the better. About 15% of your FICO credit score will be measured by the length and age of each credit line on your credit report.
New Credit
Shows the recently opened credit accounts along with your applications.
Credit Mix
The variety of your credit accounts. Although it makes up only 10% of your credit score, if you’re applying for a credit card or a loan for the first time while you have the other, lenders may request additional information about your income and employment. That is of course unless you have a good credit score.