Money Advice

Build your credit score fast in 2023

Published by
Lethabo Ntsoane

It can be difficult to build your credit score because many people don’t know where to begin. There is far too much information available about improving one’s credit score, but the rate at which one improves one’s credit score is largely ignored. This article will provide you with some of the best tips for quickly increasing your credit score.

Following the advice in this article will help you build a credit score quickly. We considered what the year 2023 has in store for us, as well as what Covid-19 has brought to South Africa and the impact of the pandemic.

Here are some tips for building your credit score fast in 2023 so that you can afford any type of loan:

1. Apply for a credit limit increase

When calculating your credit score, your credit utilization is taken into account. This section of the credit score is often overlooked, despite the fact that it is critical when attempting to improve your credit score. Increasing your credit limit will significantly help you improve your credit score.

It is best to increase your credit limit without raising your spending limit. Each month, a spending limit of 25-30% should be maintained. Using more than 30% of your credit limit will have no effect on your credit score.

Credit usage is calculated as 30% of your overall credit score by the credit bureaus. You will be able to improve your credit usage score by spending within your credit limit. You will be able to raise your credit score in this manner.

2. Avoid credit enquiries

Credit inquiries last for 12 months on your credit report, and too many of them can affect your credit score. Ever used an agent that suggested you apply for credit from different credit providers? That is, unfortunately, bad advice. Multiple credit inquiries will lower your credit score, as evidenced by your credit report.

Credit enquiries on your credit score form 10% of your total credit score. This demonstrates why they should not be overlooked. Avoiding credit inquiries this year is critical if you want to build or maintain a good credit score.

You should also avoid loan pre-approvals, especially if you don’t plan to apply for the actual loan after receiving a pre-approval. Get pre-approval only if you are going to apply for or intend to apply for a loan.

Loan pre-approvals use a soft credit check, which has a minor impact on your credit score. The fact that you want to improve your credit score quickly should be enough to convince you not to get loan pre-approvals.

3. Avoid taking too many Buy Now, Pay Later loans

Despite the fact that Buy Now, Pay Later loans are not regulated for safe lending, they are likely to harm your credit score in 2023. Buy Now, Pay Later loans are about to be regulated, and you don’t want to be caught owing these lenders a large portion of your monthly income.

Pay off the majority of your Buy Now, Pay Later loans and close those you don’t use frequently. Buy Now, Pay Later loans are still a viable option for anyone in need of a loan to make a small purchase; their primary benefit is that they do not appear on the credit report. 

As you use Buy Now, Pay Later loans, make sure that you make timely repayments on these loans and don’t neglect any of them. 

4. Make debt repayments before the time

Making payments on time is ideal, but if you want to avoid problems with your credit score, pay your credit before the due date. The issue with paying credit on time is that lenders may take some time to reconcile your account. This can be reported to the credit bureau as an arrears account.

Debt repayments constitute 35% of the total credit score. If you miss a payment, your credit score will suffer greatly. If you are unable to make a timely payment to creditors, don’t be afraid to call and make an arrangement; this will help you keep your accounts in good standing.

Should you discover an error on your credit score as a result of repayment, you must report it. You can report repayment errors to your lender, who will notify credit bureaus, or you can contact credit bureaus with supporting documentation to change the status.

5. Diversity in lending

You must have a diverse range of credit options in order for your credit score to grow quickly. When calculating one’s credit score, the credit mix is considered. Diversify your credit portfolio by having revolving credit, store credit, a credit card, or any other type of credit.

Credit mix accounts for 10% of one’s credit score, it is critical to understand this section. However, don’t open too many credit lines because they will be difficult to manage. Three to four well-diversified credit facilities can get you started.

6. Long credit history

You already have an advantage if you have a long credit history. Creditors want to know your credit behavior, and without a credit history, they can’t tell if you’re good at managing your credit. Start as soon as possible to obtain credit so that this can work in your favour.

Encourage young adults over the age of 18 to apply for credit so that they can benefit from it in the future. Credit history accounts for 15% of your credit score. Make sure to pay your credit cards on time so that you can benefit from a positive credit trend.

Conclusion

You should not be concerned about improving your credit score this year. Use the advice in this article to boost your credit score as quickly as possible. If you have a low credit score due to late payments or too many credit inquiries, it may take more than a year to rebuild your credit. As such, your credit score is time-sensitive, ensure that you nurture it today so that it can bear fruit in the future.

Lethabo Ntsoane

Lethabo Ntsoane holds a Bachelors Degree in Accounting from the University of South Africa. He is a Financial Product commentator at Rateweb. He is an expect financial product analyst with years of experience in reviewing products and offering commentary. Lethabo majors in financial news, reviews and financial tips. He can be contacted at lethabo@rateweb.co.za

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Published by
Lethabo Ntsoane

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