How to Successfully Increase Your Credit Score
When lenders are viewing your credit score, which ranges from a low of 300 to a high of 850, they are looking for details from your financial past that will aid them in deciding whether to off you a loan. Your credit score also factors into the amount of the loan offered and the rate of it as well.
Your credit score is just one number, but that one number is a representation of the entirety of your credit report. Payment history, credit accounts, and more are all tracked by the three national credit bureaus which are Equifax, Experian and TransUnion. Some banks use their own system of tallying a person’s score, but the majority of lenders use FICO which has been in existence for several decades.
It goes without saying that the higher an individual’s score is the more likely it is that they will be approved for credit with superior terms when compared to someone who has a lower credit rating. Having a low credit score can determine interest rates as well as decide if you even receive that line of credit or loan to begin with.
Improving your credit score is not an overnight process, but it can be done with time, patience, and quality money management skills.
Figure out Why Your Score Is Low
Before you think about ways to improve your score, you first need to actually know what your score is among the three national credit bureaus. Knowing the number is the first step, but you still need to know why your score isn’t high as well. Not keeping up on bills? Did you default on a loan? Did your car or get foreclosed on? These are only some of the things that can lower a credit score and keep it down if continually done.
Lower Debts Immediately
Approximately 30% of an individual’s credit score is determined by the amount of credit used in relation to their credit limit. Lenders report to the national bureaus at least once per month, so paying off some of that debt is essential to raising your score, and also one of the quickest ways to do so.
Alter Financial Behavior
Accounts that have been sent to collections and things such as late payments account for 35% of your credit score and stay on it for 7 years. One way to lessen the blow of this is to change your financial behavior, starting today. The best way to do this is to begin paying your bills on time. Late payments have less effect on a score the more timely payments are made. Remember that there are many options out there for easier payment, such as automatic payment systems from banks and creditors. One should also keep in mind that the more they request new lines of credit, the more their score is negatively affected.
Although these are just some examples of ways that one can start improving their credit score, the majority of them are things that many people fail to do, and doing so only causes them to financially suffer for it. Do not become one of these people who do not manage their credit properly, follow these tips and your credit will certainly improve with time.
