How to Boost Your Credit Standing with These 6 Easy Tips

Surely, you don’t want to work abroad forever. Nonetheless, you work hard and save so you can start a small but sustainable business in the Philippines. You are even thinking of getting an OFW Loan to help you jumpstart your entrepreneur life.

Before your loan is granted, banks and other lending institutions need to dig deeper and check your credit standing. This is crucial because your credit standing is one of the deciding factors for the grant or denial of your loan. Poor credit standing equates to outright denial and harder time to get a bank approval, which you don’t want to happen.

Don’t worry. You can boost your credit score with the help of these tips: 1) Get a credit card and make sure to use it wisely.

This is the first and easiest step in boosting your credit standing. This is because it the simplest way to show banks that you are a financially good-paying and responsible borrower. You can show how disciplined you are in terms of making purchases and paying your dues on time, which leads you to the next tip.

2) Always pay in full and on time. 

Getting a credit card is just one part of boosting your credit standing. The challenge is when the bill comes and how much you can pay.

You can come up with tons of excuses – forgetting about the due date, lack of funds, emergency, long lines – and sadly, banks will only see that as late payment, which is not good. As much as possible, pay on time and in full in a consistent manner. Minimum payment is acceptable, but the remaining balance plus interest will be carried over to the next billing statement – and it’s not a good sign.

3) Avoid going beyond your credit limit. 

Here’s the danger of having a credit card: there is a tendency to use it to the last centavo – and more. After all, you can always pay for the minimum fee every month to avoid incurring penalty. Unfortunately, lending institutions frown upon this and consider it as a red flag. This could have a negative effect on your credit score.

If you can’t pay on time, consider paying in installments or better yet, avoid making purchases if you can’t pay in cash.

4) Limit to one or two credit cards. 

Banks these days can be a source of temptation, especially if they see how much savings you have in their bank. They tend to send your credit cards at your disposal. The problem with this is that there is a tendency to use them without paying all your purchases in full at the end of the month. Maintaining three or four is fine as long as you are able to pay in full and on time, which will have a positive effect in your credit score. Otherwise, stick to one or two. This will save you from drowning in debt too.

5) Keep your debts to a minimum. 

In checking your credit standing, banks will look into not just your average monthly deposits in the bank and credit cards but also other past and existing loan facilities with other financial institutions. If you have existing loans, make sure to pay them off or at least keep them to a minimum. You may also consider consolidating your debts or transfer credit card balances into a credit card with lower interest rate.

6) Ask for a raise in your credit limit, if possible. 

Don’t get too excited. Keep in mind that credit reports are based on percentages. This means high credit limit often result to lower credit utilization.

For instance, credit card A has an outstanding balance of P10,000 and your current credit limit is P15,000. You have a credit utilization rate of at least 65%, which is not good. You asked for an increase in credit limit, which the bank granted and gave you P25,000. At this point, you have a credit utilization rate of 40%, which is lower and more acceptable than the 65%.

The rule is simple: pay on time. Otherwise, minimize your debt and an increase in your credit score will follow.