Just like how grades in school are a measure of your performance, your credit score is a measure of your creditworthiness. The higher your score, the easier it is to get approved for loans and other lines of credit. When you borrow, having a high credit score allows you to negotiate better interest rates.

However, maintaining the credit score is not as easy as it seems. There are many factors at play, and many things can happen. Thankfully, a low credit score is not the end of the road. There are many simple things you can do to boost it back up. It may take a few months to see an improvement, but it’s better to have some than none at all, right?

Here are the measures you need to take to restore your health credit standing.

1. Check and understand your credit score

Checking and trying to understand your credit score may be ordinary advice. However, this is the very first step to boosting the score. Credit scores can fluctuate from month to month and will not always be the same. This means you have to take into consideration the bitterness to anticipate when a big change occurs.

Credit scores are calculated by credit bureaus based on the information found in your credit reports from nationwide consumer reporting agencies using a particular scoring model.

Many significant factors determine how much each factor is weighed in credit scoring. You may consider:

1. Payment history (35% of your score) reflects how consistently and media etc committed you are to paying your payments on time. Your credit score will suffer as a result of late or missed payments.
2. Amounts owed (30% of your score) means the total amount you owe and is the sum of your balances across all of your credit lines, including those from an authorised money lender. Here, the lenders will value you based on how you pay off all your monthly balances.
3. Credit mix and solid history (10% of your score) relate to the combination of various account types, such as credit cards, mortgages, or other loans you have taken out. If you keep these account types and have a good payment history, you can show lenders that you understand the basics of credit.
4. Credit age (15% of your score) can be the source from which lenders can see your established lines of credit. To avoid reducing the overall length of your credit history, keep your credit accounts open even if you no longer use them.

2. Lower your credit utilisation rate

The credit utilisation rate is the percentage of your credit limits that you are using at any particular time. This is the second-most important factor in your credit score. Typically, a decent rule of thumb is to keep it less than 30%. Lower is better. The lower the rate, the better.

To keep your balance low, pay off the balance before the billing cycle ends, or pay several times throughout the month. When your credit card provider reports a reduced amount to the credit bureaus, that lower usage will be reflected in your credit score.

It’s also recommended that you regularly check your credit card accounts to let you know when your balance hits a set amount.

3. Ask for higher credit limits

If your salary has increased or you have years of favourable credit usage, you will have a better chance of receiving a bigger limit.

To use this strategy, talk to your credit card issuer to see if you can get a higher limit. Once your limit gets higher, your overall credit usage will technically be lower, provided that you don’t use it up.

But before doing so, have a plan to keep your spending patterns consistent and not max out that extra available credit. If you believe you cannot follow said plan or have none in the first place, this technique is not for you.

4. Pay bills on time

Believe us, the history of your ability to make repayments is one of the most crucial factors in credit score calculation. So, pay your credit cards, loans, mortgages, or any other essential bills on time. Not to scare you, but late payments stay on your credit reports for quite some time.

If 30 days have passed since you failed to make a payment, you must promptly contact the creditor. Pay as quickly as possible and request that the creditor not record the late payment to the credit bureaus.

5. Add utility and rent payments to your credit report

Rent payments are not taken into account by all scoring models. However, a long track record of consistent rent payments can only assist if a potential creditor examines your reports. Ask your landlord or the utility companies you used to report your on-time payments to the three nationwide consumer reporting agencies.

You have to make sure you have a positive payment history to consider taking this report payment because some services provide a quick “lookback” of the last two years of the borrower’s payments.

Conclusion

We hope this guide can shed light on your financial journey and help you realise that setbacks are a catastrophe. It can be the best opportunity for comebacks and to bring your credit score back up. By understanding these factors, we hope you can be more aware of reviewing your credit report regularly, be creative and conceptualise creating a payment plan, be introspective about reducing credit card balances, and so on.

Yes, the process takes time, but once you understand the principle of consistency, your credit score will improve in the near future.