You’ve been hearing about credit scores from friends and family for a long time; maybe even long before you know about purchases, investments, loans, and the like. But what about it? What is it and why is it important?

Credit score is one of the factors that can make or break your bank loan applications. This is given to you to determine whether you are a trustworthy borrower of not. This can help lenders understand your capacity to pay back the loan you are trying to apply for, which will then lead them to decide on how much they are willing to lend you, including your possible interest rate and credit card limit.

This score represents how good you are with managing your finances. This shows your finance history and would  interpret whether you are a risky borrower or not.

So if you’re planning to apply for a loan, make sure that you have a good credit score to show your bank and lenders. With that, here we have prepared a list of how you can improve your credit score.

1. Pay your bills regularly

You should pay your bills on time. This does not only mean your credit card bills and loans but this also includes your rent, utilities, and even phone bills. Being able to show your bank and lenders that you are responsible enough to pay your bills regularly will show that you are a reliable borrower.

2. Pay your debts

Try your best to keep your credit card balance low. Always aim for a low credit utilization ratio as this will have a positive impact on your credit score. This will show that you do not max out your credit cards and that you manage your credit history well.

3. Get extra credit for phone bills and utilities

If you know that you pay your bills responsibly and on time, why not get extra credit score for it? There are companies that offer this service and they will definitely help you improve your credit score.

4. Keep your unused credit cards

Do not close your unused credit card accounts as long as you are not paying for annual fees. Doing so can increase your credit utilization ratio and we don’t want that. Seeing that you aren’t paying for annual fees, keeping unused credit cards open is a good decision.

5. Open new credit cards only when necessary

You don’t have to open new credit cards if you don’t need them. Despite having an increased overall credit limit, this can negatively affect your credit score. This is because application of new credit will create hard inquiries in your credit score and these guys last for as long as two years.

6. Monitor credit reports

You should check on your credit reports for possible inaccuracies. If there are any errors, make sure that you will have them corrected immediately. This can also affect your credit score negatively.

Try your best to keep a good credit score. Your future self will really thank you for that. Consult with a mortgage broker as well so that you will have expert advice regarding how to handle your finances properly.