When it comes to borrowing money from a bank, credit union, or any other kind of lender, one needs to ensure that they have a good credit score to qualify for the loans. What is a credit score? Also known as a credit rating, a credit score is a number that is used by lenders to reflect the likelihood of borrowers repaying the credit. This score works in such a way that the higher it is, the higher the chances that lenders will offer you money. Remember that your credit score is calculated based on how you repay any kind of credit offered to you. Be it utility fees, phone bills, credit cards, or bank loans, and one has to be very careful and ensure they repay such bills on time to improve their credit score. Therefore it will be difficult for lenders to trust you with their money unless you improve your credit score.
All people who have a poor credit rating are not lost since they can improve on their score and qualify for loans. There are many things one can do to improve their credit rating. We shall discuss some of these things here.
Here are six surprising tips to help you improve your credit rating:
What is your current credit score? If you are not aware of your credit rating, then it becomes difficult for you to improve a score you are not aware of. As such, the first thing you need to do is get to know your score and work on it. This is the best way you can monitor your score and improve it with time. Many credit agencies can give you a report about your score. You may also want to check with your lender and see if they offer you solutions. There are many other credit monitoring services that you can consult and get to know your credit rating.
The law allows that one can receive a report of their credit score once a year. You can also get free credit score information if you have suffered identity fraud. Now, one should monitor this report all the time and ensure any errors are corrected. Inform the credit agencies of any errors so that they can be immediately corrected. This makes your credit score better and updated.
This is one of the best ways you can improve your credit score over time. Remember that your credit score is derived from how you pay your bills and other financial obligations. If you are always late in payment, it means your credit score is negatively affected. Sometimes you could be forgetting the payment dates. Set an automatic payment plan to avoid a bad credit score so that your bills and debts are credited on time.
If you have received your credit score and know the shortcomings, it is time to make repairs. What are some of the things making the score low? Is it that you have too many unpaid debts? Do you plan to take on more debts? Are you suffering from heavy credit card use? One of the best ways to repair your credit score is to begin paying the debts. You should repay the debts with the highest interest rate first. Remember that lenders make many comparisons before they offer credit. Therefore, your debt to income ratio is a big factor that you should work on.
Most people cannot resist using credit cards. These modes of debt put people in financial constraints that lead to poor credit scores. If these credit cards are lowering your score, you should consider paying off the balances and stop the use of the cards. However, do not close the accounts since this could lower your score. You can keep one card active and use it responsibly. This helps you build a solid credit score record.
One must be patient as they rebuild their credit score. You cannot fix a bad credit score overnight. As such, stay current with your bills, repay debts, and soon your credit score should start to rise within a few weeks or months. It can take anything from 6 weeks to 2 years to rise to suitable scores for your credit score. Remember that a good credit rating can save you lots of money at lower interest rates. At the same time, be careful not to fall for credit repair scams.