How Do You Reduce Your Credit Utilization Percentage?
(i) Reduce the balances on cards where your credit utilization percentage is high.
(ii) Request a higher credit limit
You don’t want to use the money extended to you with a higher credit limit.
You want to lower the percentage of available money versus the amount you have used.
Credit card companies will increase your limit if you have a good history of paying the minimum due.
3. Make A Plan
Your need for a higher credit score is immediate, but you still have to plan to make the changes that are going to get you a higher credit score.
Go over all of your loans – from banks or credit cards – and determine a way to reduce balances on all loans beyond the minimum due.
Any loan you can pay off faster – with multiple monthly payments, perhaps – will improve your credit score.
4. An Easy Ask
If you are close to someone with a high credit score and no real financial problems, ask them to make you an authorized user on one of their credit cards, especially one with a high credit limit.
You can tell your friend or family member you will never use the account – don’t ask for a card, don’t put the number into any of your digital pay accounts – but you will be reported to credit agencies as an authorized user on a high credit limit account will increase your available credit against your credit used, decreasing your credit utilization number.
5. Get Points For Rent And Utility Payment
People who have a mortgage and make their monthly payments get credit for doing so.
People who pay a rent bill on time every month only get credit if they ask. They do get penalized if they miss rent payments, however.
There are rent reporting services you can contact that will send your rent payment history to credit report companies.
The use of rent reporting varies depending on the credit report company, but lenders often go beyond the Big Three to look at your credit history.
6. Improve Your Bottom Line
“I would pay off my credit card balances if I had more money to do so,” you say.
Well, you can do so in two ways:-
(i) Sell Something
We live in a world where the internet is a personal marketplace.
You have stuff you don’t need anymore that someone else might want.
(ii) Consolidate Your Credit
Credit card companies offer consolidation loans to reduce the number of cards you have to send a minimum payment to in a month.
If the math works – the consolidation loan interest rate is lower than what you pay on your current credit cards – then it is wise.
However, consolidation loans often have a massive jump in interest rate after an initial period (one or two years, perhaps), and you will want to reduce that balance as much as possible.
7. Keep Credit Card Balances Low
Aim to keep your credit card balances as low as possible, ideally below 30% of your available credit limit.
High credit card utilization can negatively impact your credit score, so paying down your balances can have a positive effect.
8. Avoid Closing Unused Credit Accounts
Closing old or unused credit accounts may seem like a good idea, but it can actually lower your available credit and potentially increase your credit utilization ratio.
Instead, consider keeping those accounts open to maintain a longer credit history and a lower utilization ratio.
9. Diversify Your Credit Mix
Having a mix of different types of credit, such as credit cards, loans, and a mortgage, can positively impact your credit score.
Lenders like to see responsible management of various types of credit, so consider diversifying your credit portfolio if it makes sense for your financial situation.
10. Correct Errors On Your Credit Report
Regularly review your credit reports for any errors or inaccuracies that could be negatively impacting your credit score.
If you spot any mistakes, such as incorrect personal information or accounts that don’t belong to you, dispute them with the credit bureaus to have them corrected.
11. Be Mindful Of Credit Applications
Applying for new credit can result in a hard inquiry on your credit report, which can temporarily lower your credit score.
Limit unnecessary credit applications and only apply for credit when you genuinely need it.
12. Maintain A Positive Payment History
Consistently paying your bills on time is crucial for maintaining a good credit score.
Late payments can significantly impact your credit, so make it a priority to pay your bills by their due dates.
13. Manage Debt Responsibly
Keeping your overall debt levels under control is important for your credit score.
Avoid accumulating excessive debt and focus on managing your existing debts effectively, making regular payments and reducing outstanding balances.
Get Help
There are companies that will help you boost your credit score for a fee.
But if the bottom line works for you, paying a company a fee to get more money, a lower interest rate on loan, or a higher credit card limit, then it is worth investigating such a service.
Experian can help you get credit for rent, utility payments, or payments to streaming services and will monitor your current credit status to make suggestions to improve your credit score.
Conclusion
Boosting your credit score overnight may seem appealing, but it’s important to remember that genuine and lasting improvements take time.
Instead, focus on implementing smart financial habits, paying bills on time, reducing debt, and maintaining a healthy credit utilization ratio.
With consistent effort and responsible financial management, you’ll witness a gradual increase in your credit score, leading to long-term financial stability.
Remember, patience and persistence are essential for improving your creditworthiness.
