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How to Improve Personal Credit

Poor credit can affect almost every part of your life. You’ll have problems getting loans, credit cards, a mortgage, and even a cell phone. If you have an eCommerce business, you can even have a hard time getting a merchant account that allows you to accept online credit card payments from your customers.

Improving your personal credit can help you successfully get accepted for a merchant account so that you can build your business. Here’s how you can do it.

Understand Your Credit Score

Your credit score comes from your credit reports, which provide credit bureaus with information about you and your debts. Based on a scoring model, a credit reporting agency calculates your credit score. Your credit score is a result of a few factors, including:

  • Payment history
  • Credit utilization
  • Length of credit history
  • Credit mix
  • New sources of credit

Typically, the first two, payment history and credit utilization, will affect your credit score the most. Your score will rely on paying your bills on time and the status of all of your credit card and loan accounts.

Dispute Errors

You should check your credit score or report at least once a month to make sure there have been no errors. If you spot an error, like a debt that was paid off but is still labeled as outstanding, then you’ll need to report that to the credit bureau. Finding these errors is relatively easy, and fixing them is quick, so it’s something that you should check for, especially if you want to increase your score dramatically.

Make Payments On Time

The most significant determining factor of your credit score is your payment history. This means that you must pay your bills on time. Even just one missed payment can have an impact on your credit score.

Keep Debt Low

Credit utilization is another aspect you should continue to monitor closely. Credit utilization is the amount of money you have outstanding versus the amount of available credit you have. Your credit utilization is typically a ratio or percentage of your credit that you’re using.

Keeping your utilization rate low will help you boost your credit each month.

On the other side of this, you can dramatically improve your utilization ratio by increasing your credit limits. You can increase your limits by applying for a credit card, applying for a line of credit to be increased, or keeping old accounts open.

If you have credit cards you don’t use anymore, don’t close the account. Instead, make small purchases with them so that you still have that line of credit available to you and can keep your utilization rates low.

Your personal credit score will affect your chances of getting a merchant account from banks. If you have poor credit due to poor spending habits in the past or for any other reason, you’ll be labeled as too high of a risk for banks to work with you. Luckily, companies like High Risk Pay can help set you up with a high-risk high volume merchant account so that you can continue to grow your business.