How to Improve Your Credit Score
What is the first thing that a lender or a credit agency will inquire about when you apply for a loan application? If your answer is your credit score or credit rating, you are absolutely correct! Credit score and rating play an essential part in the approval of loan applications and confidence from the lender.
It is a way for lenders and credit agencies to judge and predict your future ability to comply and repaying the debt(s). While a bad credit score would mean the loss of credit lenders’ focus, a good or high credit score can assure relatively better chances of success in receiving your desired loans.
For that reason, we have compiled a list of few short but extremely useful tips to help you boost your credit score and avail of the best credit services present around you.
Begin With Building a Credit File
Firstly, it doesn’t matter how timely your previous debt repayments are if you do not possess a credit account. It records and compiles your credit score history in official credit files that undergo credit bureau investigations.
In fact, having several different credit accounts can be helpful to build a solid credit file. So, build your first credit file or re-check on an existing/previous to lay out a nice impression of your credit history.
Pay Your Bills Promptly
Paying your bills on time is highly effective in determining an excellent credit rating. It is not only the ability to pay the debts in time but also the reliance and lower chances of bad debts on account of lenders. All in all, the characteristic of timely payments is a vital determinant of credit scores.
Use Credit Reports
As most credit bureaus go, they entitle creditors to one free annual credit report. Therefore, it represents a critical opportunity to rectify any intentional or unintentional errors, faults, misinformation, or changes in your credit report that negatively affect your credit score.
Disputing errors can improve your credit score as you may get a chance to correct any misinformation pertaining to late payments, wrongful bad debts, or other material errors such as names, accounts, addresses, etc. Overall, you get the closest to making credit fixes through annual credit reports.
Try Consolidating Outstanding Debts
Debt consolidation is a common method of realizing debts and paying off old ones. In reality, you borrow a significant loan from a single lender or agency to pay off multiple different debts at once.
Often, you may be able to benefit from lower interest rates that make it easier to pay off the single large debt. Likewise, it can improve your credit score due to timely payments and help with enhancing the credit utilization ratio.
Lower Credit Utilization
Credit utilization means the ratio or percentage of the credit limit that you are availing at the moment or previously. For instance, you may take up a loan for $5,000 USD under a credit limit of $10,000 USD which will present a credit utilization ratio of 50%.
Consequently, you can try to take up significantly lower or divided loans from multiple sources to lower your credit utilization to present a good credit score. However, opting for multiple smaller loans rather than a single optimal loan may entail varying interest rates. Hence, certain discrepancies can arise in loan repayments.
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