You can Influence Your Credit Score

Although it is tempting to adopt a fatalistic attitude towards your credit score, in fact there are many ways to build your credit score without extensive investments of time and effort. And with even a modest income it is possible to improve your credit score and thus make it easier to take out a loan or mortgage further down the line. And that speedboat you had your eye on might not be out of your reach after all. By following these key principles it is possible to recover your credit score and improve it for the future. 

  • Know Your Credit Score

This is a key first step to building your score. Have a target in mind. By checking once every few weeks it is possible to keep the score in mind and thereby avoid neglect – which can be corrosive to a good score. Many free online sites exist which can help you to do check although you may wish to check with your financial advisor to ensure that you obtain a reliable reading. By knowing your credit score you can be in control and begin to take the necessary steps to improving it.

  • Build Reputation

This is a key component of credit. The word credit actually comes from the Latin credo meaning ‘to believe’ and reflects how important reputation and trustworthiness are in determining credit worthiness. Your credit can be enhanced therefore by actively taking out small loans with the intention of quickly repaying them. It is possible, for instance to take out a small private loan of $1,000 with your bank and repay the full amount within three months. Before taking out this loan ensure that you have the money on hand, and repay it in full. This will demonstrate responsibility and trustworthiness and help support your reputation among potential lenders.

  • Only Borrow in Line With Your Income

Another component of credit score is the ratio of the loan to your monthly income. If you consistently borrow and repay only within a reasonable range (10-20% is a sensible range) of your income you can demonstrate responsibility and a sustainable attitude towards your financial future. On the other hand, you should avoid borrowing at an unsustainably high level. Delay large purchases or draw on monthly income where possible. 

  • Maintain Your Credit Score

While recklessly borrowing beyond your means will damage your credit score, long periods of inactivity can also be harmful. Credit score agencies rely on data to form their predictions. Therefore, if you starve them of data for long periods it can be difficult for them form a positive picture. Therefore, it is a good idea to constantly build a strong impression as a responsible borrower. Even if you are out of the country or unemployed for a period, find a way to borrow and repay at very small amounts. This will help potential lenders build a profile of your trustworthiness.

  • Good Credit Means More Options

Although these steps differ in some ways they all share a common principle. Building your credit score involves frequent conservative borrowing at levels safely within your means. By forming good habits today you can build your credit score sustainably and sensibly ready for the challenges of tomorrow.