Your credit score decides everything related to debt. Getting the loan approved and the interest rate you’ll be offered, for a mortgage, student loan, another credit card, or auto loan is all dependent on your credit score.

A good credit score increases your chances of not just getting a loan but a good interest rate and insurance coverage, so if you are looking forward to applying for a loan, here are 7 ways that you can use to boost your credit score.

1.Keep an Eye on the Credit Score

You are allowed to receive a credit report once a year free of charges so request a credit report to check your credit score. You can request a credit report from any of the 3 largest credit unions; Equifax, Experian, and Credit Union.

Look at why your credit score is what it is. Some lenders may make mistakes in handling data that may show up in your credit reports such as a late payment or skipped payment. While examining your credit report, if you come across mistakes call your lender to settle the problem.

2. Use Credit Cards for Groceries and Small Payments

Using a credit card responsibly maintains a good credit history. If you don’t have a credit card, get one and start using it to pay small expenses such as groceries and utility bills. Later pay them back within 30 days to keep your credit score at its maximum. Paying the credit card balance in time shows that you are a responsible person who pays back debt and creates a credit history and a good credit score.

3. Don’t Get Rid of Old Credit Cards

Old credit cards that you haven’t closed show that the person has been using debt services for a long time. Even if you don’t use old credit cards, keeping them working is a great way to boost your credit score. When you close an old credit card account, it decreases your score initially that may bounce back in a month or two when you constantly make debt repayments on time. So, if you are applying for a loan within a month or two, keep your old credit card account open even when you have to pay service charges.

4. Negotiate Outstanding Balances

Outstanding balances cannot suddenly disappear from your credit history but it is always a good idea to do something about it. Talk to your lender about paying down the outstanding balance.

Involve a credit counselor and make a strategy for negotiating the interest and payments with the lender. Write down a written agreement to help you persuade the lender.

5. Credit Utilization Rate

You might be hurting your credit score with a high credit utilization rate. Credit experts say that you should only use 30% of your credit limit. Going near the limit negatively affects your credit score even if you pay back the balance in time, you should never reach the limit.

Let’s say you have a credit limit of $10,000 and you withdraw $10,000 each month and pay it back. Everything feels fine, but it will be playing havoc on your credit report.

If you want to borrow more money, ask your lender to increase your credit limit. Or you can get a second and third credit card with a $10,000 limit to withdraw $3000 from each without hurting the credit score.

6. Catch Up on Past Due Accounts

One late debt repayment can stay on your credit report for up to 7 years. There is nothing you can do to change the late payment but there is a way you can boost the credit score if you are falling behind on paying back debt.

Make all your credit accounts current so that the late payments are no longer history and the late payments are removed from the credit report. If you have unpaid accounts, talk to your credit counselor on how you can negotiate lower payments or interest to pay back the debt and boost your credit score.

7. Become an Authorized User

This is the ultimate solution for those individuals who cannot maintain a good credit score. You could have outstanding balances or be doing anything that may hurt your credit score but even, in that case, you can increase your credit score. What you have to do is find a loved one who has a good credit score. The one who pays the debt in time, and uses credit cards responsibly. Convince this person to add you to their account. A parent, partner, or a close friend might trust you if you assure that you won’t withdraw from the credit card.

When they have added you to their account, your credit score will improve when the primary cardholder pays the debt in time and doesn’t utilize the entire credit limit.

Bottom Line

Ideally, you should start building credit three months before you are planning to apply for the new loan. Stop looking for ways to boost your credit scores overnight. Credit scores cannot be boosted as quickly as you may think, so have some patience and try everything you can to get that credit score up.