How To Improve Your Credit Scores
In our modern world, it’s almost impossible to manage without credit of some sort. There are few people who haven’t swapped down a credit card for some high-end purchase and not given a thought to how it will be repaid. But managing life with credit is much more than being able to pay off your credit card bill or not. Like some credit Big Brother there are systems watching what we spend and more importantly how we repay it.
If you want to be successful and attain higher financial goals in a shorter span then it is essential that you have a higher credit score. A higher credit score opens up doors on opportunities by enabling you to get the lowest insurance rates and better credit card rates. Lower scores limit your growth and make it harder to advance by getting loans. With a higher credit score, you can easily get loans with lower interest rates and sometimes lenders even reduce your down payment amount according to your credibility. With higher credit score you can attain success with minimum effort.
Here are some tips that will help you in improving your credit score:
1. Be Mindful About Your Payments
Credit scores are greatly influenced by your previous payment history so always pay your debts as soon as possible. This will help you score higher on scoring systems used by lenders. Your timely payments reflect your sense of responsibility and demonstrate your credibility to show you are dutiful and pay your debts on time. This gives positive vibes to lenders encouraging them to agree to lending money or assets on easy installments with minimum interest and down payment.
Remember once a defaulter always a defaulter. So if you are the person who tends to procrastinate your payments, you will never be able to score high credit scores and fall in the bad books of lenders. Getting loans or purchasing items on credit will not only be difficult for you but will only be granted on strict terms and at greater cost to you.
2. Keep Your Credit Balances Low
For acquiring higher credit scores, it is essential that you keep your balances low on all your credit cards or other revolt cards. This means that you limit your credit cards usage so it never reaches its maximum limits or you keep paying off debts after utilization of credit.
Lenders usually prefer people with 30 % or less credit utilization ratio while approving loan requests. The credit utilization ratio is the ratio of your average credit card balance or billing with all your credit cards` maximum limit. Your average credit utilization ratio is calculated by last 12 or 24 months of credit card statements.
Your low credit utilization ratio indicates your smart utilization of credits and makes you a preferred candidate for loans or a mortgage. You can easily lower down your utilization ratio by either keeping your credit card balances low or by becoming an authorized user of another sensible credit user’s account.
3. Never Wipe Out Traces Of Your Old Debts
Some people hate their old debts and they prefer to discard all their debt records as soon as they are paid completely and want no traces of them on their report. But this is not a good idea. It doesn’t make you a better candidate for a loan; instead, it eliminates your proof of being reliable. Your previously timely paid debts are proof of your credibility and guarantee of your future timely payments.
Old debt history adds to your credit score. Your previous debts history with their payment schedule tells a lot about you to the creditor or lender. Keep long term accounts with credit card billing details that depict your timely payment and low balances. It is always a bad idea to close these long term accounts as they are your credentials when applying for loans.
As your timely payment schedule of previous debt speaks volumes about your trustworthiness, similarly your bankruptcies are evidence being a defaulter but the good news is that these bankruptcies remain on your report for 10 years or less. Likewise, your delinquencies like collections, repossessions, foreclosures, and settlements stay for just 7 years on your report and you can safely wipe them from your reports once their designated span comes to an end.
4. Multiple Credit Products
If you use multiple credit sources like credit cards, home equity lines and manage them well along with managing your fixed installment loans like the auto loan and student loan then this raises your credit score. Your smart management of multiple sources of credit makes you a preferred candidate in the eyes of creditors and lenders.
5. Limit Your New Credit Requests
Never ever request multiple credit requests at the same time. Always allow ample time span between requesting new credit cards or loans. Too many requests at a time create a hard inquiry on your report which lowers your credit scores and stays on your report for a couple of years.
6. Review Your Credit Reports
It is advised to review your credit reports on a regular basis and try to eliminate any plausible error on it. Wrong reporting and erroneous details decrease your credit scores and impact your credibility. Be honest in your report and never try to hide crucial details as they will only lower your credit scores.
To get the most from using credit, forget about taking the money and running. You won’t even see it if you don’t play the credit game by the rules of the lenders. Credit isn’t a right. It’s earned. No one wants to give away money with little or no chance of return. Since a life without credit is virtually undoable, the path to receiving credit at fair rates throughout life starts from the second you get your very first credit card bill and your decision about how and when you are going to pay it.