Tips on improving Credit score
You find that lenders have different definition of what a good credit score is. There might be a lender who offers loans to only those having a credit score of 750 and above while others can approve loans of those having a credit score of only 680. You need to be aware that any company offering credit ensures you have a ‘good’ credit score as this indicates the level of risk. These credit companies also keep a watch on the number of delinquencies reported and the number of hard inquiries in your credit file. Besides this, these companies make a note of the income, the utilization of credit card and the general credit history health.
Improving the Credit Score:
Though the process of fixing a bad credit score is long and tedious, there are some steps to be taken on an immediate basis. You need to get responsible and ensure you are strict where the credit score is concerned.
1. Reduction in the Debt:
For this very difficult step of reducing the debt you need to make an effort and not use your credit cards. With the help of the credit report, list out all your accounts. You need to then check the statements to help you determine the amount you owe on each of the accounts and the rate of interest you are charged. Plan on paying off the debt of the credit card, with the highest rate of interest.
2. Set-up Reminders for payments:
For that credit score you are looking for you need to strive on paying off the credit on-time. There are a number of banks which send an SMS alert or e-mails as payment reminders. Planning on automatic payments from your credit card or crediting the amount you owe for the different loans directly from the bank account is one step which can be taken.
3. Opening New Credit Accounts:
It is advisable to avoid opening any new accounts only to ensure a better mix of credit. Credit which is not necessary can do more harm than good to your credit score.
4. Inaccuracies on the Credit Report:
Your credit report needs to be checked with all the three credit bureaus (Experian, Equifax and TransUnion) for any information which is incorrect and discrepancies which can bring down the credit score. If you find any errors you need to dispute and ensure that this is set right.
Late payments tend to impact the credit score in a negative manner. Each payment made is scrutinized closely. Besides this, too many inquiries can also impact the credit score and there are chances that you might get penalized.
The debt-to-income ratio is calculated and this ratio needs to be on the lower side to ensure that you can avail the money required for any future debt.
Following the above mentioned tips and information can help you build a strong foundation for the credit score along with a good future where the finances are concerned.