5 Proven Steps to Improve Your Chances of Getting Credit
In these uncertain times, establishing and maintaining good credit is more important than ever, and there are simple, proven approaches to doing so.
Credit scores are essential for obtaining mortgages or loans, but they can also have a significant impact on all financial aspects, from the prices of mobile phone contracts, car insurance to general employability.
How to increase your credit score
Your credit score is supposed to indicate whether you are a high-risk or low-risk candidate.
FICO and VantageScores (created by the three major credit bureaus, Experian, TransUnion and Equifax) range from 300 to 850 stitches.
A score of 700 points is famous “excellent,” and lenders will offer you better loan terms and fees if your credit score is higher.
Below are ways to increase your credit score:
1. Pay your bills on time
Experian reveals that loan repayment history is the most crucial factor in VantageScore and FICO scores. From a lender’s perspective, a history of on-time payments is a strong signal that a borrower will properly meet future obligations.
According to John Ulzheimer (credit expert), you need to avoid mistakes such as garnishment, third-party collection, late payments, and defaults if you want to improve your credit score. He also says that declaring bankruptcy is a bad decision, as it may indicate failure to fulfill a responsibility.
2. Make sure your credit utilization rate is low
Check your balances against the credit limit to make sure you’re not overusing your credit card, which could put you at risk.
Ulzheimer suggested aiming for a 10% utilization rate and explained that the higher this ratio, the fewer points you’ll get in that category. He further observed that the highest average FICO scores had a usage rate of 7% t.
Additionally, your utilization rate may be affected by the date your credit card company reports to credit reporting agencies.
Your score is based on your utilization rate when your lender reports. FICO’s scoring methods, according to Ulzheimer, make no distinction between people who pay their credit card in full each month and people who have a balance. On the other hand, VantageScore considers whether you are paying in full or carrying a balance from month to month.
3. Keep old accounts open
Most people are tempted to delete loan records after deleting them, especially student loan. But if you’ve made the repayments on time, these records can significantly boost your credit score.
According to Bistritz-Balkan, vice president of communications at Equifax, borrowers should not close the account in the hope that it will improve their credit score, when paying off their debts in full and on time is a good thing. She added that having an account with a good payment history can encourage lenders to give you loans with better terms.
Closing a credit card account will damage your credit score since your maximum credit limit will be reduced. It is best to keep the card with a zero balance. If you still have balances on other cards or loans, your utilization rate will increase.
4. Take advantage of score improvement programs
The number of accounts and their average age play a big role in your credit rating, putting those with a limited credit history at a disadvantage.
ultraFICO and Experian programs allow borrowers to improve their credit profile by advising them on their financial problems.
You can link your bank details to these programs, allowing the credit bureau to include your online payment and bill statements in your credit file. When UltraFICO calculates your score, you can allow your financial data, such as checking and savings accounts, to be reviewed alongside your credit report.
5. Apply only for the credit you need
It’s not a good idea to ask for more than you need, whether you’re approved or have received a prequalified credit offer.
Loan matching services, such as Viva Payday Loanswill connect you with reputable lenders online, avoiding lenders who will only charge you hidden fees and ensuring you repay your loans on time.
You may find it difficult to repay the amount on time. A series of difficult inquiries, on the other hand, can tell lenders that you are in too much debt. According to a TransUnion spokesperson, the consequences of a hard credit levy on your score could persist for up to 12 months.
Don’t panic if your bad credit rating is holding you back. You can start improving your credit score and put yourself on the path to a better financial future right now.
A good credit rating has a significant influence. You’ll be able to get cheaper interest rates on anything from student loans and personal loans to mortgages and credit cards if you have a higher credit score.