How to Improve Your Credit Score
If you aren’t able to obtain approval for credit cards or loans or aren’t getting desirable interest rates for financing, you may want to look into increasing your credit score. Building an excellent credit score isn’t a particularly fast or straightforward process, but we have some pointers that can assist you along the journey to building a great credit history.
The first thing you should do is to get an idea of where your current credit score stands & to ensure that it is based on the correct financial information. Once you have an idea of what your score currently looks like, utilize these suggestions to start building a better credit profile.
Benefits of Improving Credit Score
A poor credit profile could possibly cost you hundreds of thousands over the course of a lifetime. It can also come to be the cause of major stress. A superb score, on the other hand, can help you get lower interest rates when applying for many types of loans & open many opportunities for you financially. However, the process of improving your credit score often takes time.
Immediate Steps to Improve Your FICO Credit Rating
When looking to quickly bring up your FICO score, you should:
- Routinely check the record of your credit history for errors.
- Set up reminders for payments.
- Work to minimize the overall quantity of debt that you carry.
Your payment history contributes to over 1/3 of the score estimation for your FICO credit profile as well also having the most substantial influence on how you can improve your credit score.
Tips for Improving Your Credit Profile
- Rapid rescoring. This practice is generally made use of by home loan originators to quickly raise a potential borrower’s credit score. It is a two-step process that includes correcting & updating information from your credit history, which is then sent to the major credit score bureaus. These updates are quickly added to your credit history data & can lead to substantial improvements in credit score in just days.
A fast rescore is not something that a borrower can do on their own. They will likely need the aid of a bank or financial lending institution as this option is only provided to larger lending companies by the 3 major credit bureaus.
- Make all payments on time. Your credit history represents your capability to pay back debts in a timely manner. It is extremely important to keep your financial status in the green to show loan providers you’re a responsible borrower that can be trusted. From a lender’s perspective, a well-established history of timely repayments is a good indicator you’ll take care of future financial debts sensibly as well.
Credit history is the most significant element for both FICO and VantageScore, two of the most common scoring systems.
- It is a great idea to keep an eye on your credit utilization ratio. Weigh your balances relative to your credit limit often to ensure you’re not using a large percentage of your available credit. This can be a sign of danger to lenders as those who carry a higher utilization ratio often have more issues paying back their debt on time compared to those with use less of their available debt.
Credit score utilization is typically the second most prominent classification that can influence your credit score.
The higher the proportion, the more risk you are perceived to pose to potential lenders. Optimally, you should aim to utilize less than 10% of your available credit, but a ratio of 30% or less is considered to be decent.
- Leave old financial obligations on your report, if they help. Not all past debts are bad for your credit score. Those that were repaid completely & on time are debts that may, in fact, aid your credit score. On the other hand, you do want to remove things from your credit histories such as bankruptcies after a decade, and other misbehaviors such as foreclosures, collections, repossessions and settlements after 7 years as they can contribute negatively to your credit profile.
- Build a solid repayment history with age. With no credit history at all, it can take between 3-6 months to see any activity being reported on your credit report. If you have a short credit repayment history, there’s not a whole lot you can do to immediately boost the rating of your credit score.
The ideal age of credit history for borrowers who want excellent credit is five years or more. It should be no surprise that the longer your positive credit rating is, the better your credit score may be. For instance, a customer with a short credit history of just one year might a score of 600 while someone with the same credit profile that has five or more years of excellent history could have a score that is upwards of 750.
- Open a secured credit card account. This type of credit card requires that you make deposits into a protective account that secures the line of credit that the bank or loan provider is extending to you. For example, you can open a new checking account, deposit $200 in it, and then get a line of credit for $200 (though some forms of secured loans will provide you a higher credit limit than your down payment). Adding this type of favorable payment history to your credit profile can go a long way in revealing to creditors that you are a solid borrower that can be trusted.
- Restrict credit applications. Whether you are approved or not, your credit history can be negatively impacted just by applying for new credit opportunities. Each application may result in a small (3-5 point) hit in your credit score, but a lot of damage can be done quickly if a large volume of applications is being sent out in a short period of time.
A hard inquiry can put a strain on your credit score, whereas a soft inquiry will not affect your credit rating at all.
Get Professional Help with Your Credit Score
If you find that you are still in need of help with improving your credit score, you can always contact an experienced financial advisor to give you direction on where to start. Check out our debt settlement company reviews to get an idea of which companies can provide you with quality debt relief services.Get Help Now