A Guide on How to Improve My Credit Scores – Best Steps
Many people have been searching for a Guide on How to Improve My Credit Scores. However, your credit score is the most important part of your financial life. Therefore, if you need a good and better rewards credit card, then you must have a good credit score.
Do you know that you can enjoy a low mortgage interest rate when you have a good credit score? Meanwhile, there’re other nonpopular places where a better and good credit card can assist one.
A good credit card can help you when you want to buy a new phone or when you want to get car insurance.
Although for one to build a better credit card takes a long process but good behavior can gradually help to improve your score.
Nevertheless, these options may not work for everybody because there’re problems other people’s search for solutions that you may not have.
Before we continue with how to increase your credit scores, let’s look at what credit score is all about.
What is a credit score? A Guide on How to Improve My Credit Scores
A credit score is a number between the range of 300-850 which is used to determine whether a customer is worthy of credits.
Therefore, the higher the score, the better a borrower looks to the future lenders.
Do you know that your credit score is based on your credit history?
For instance, the number of accounts opened, total debt levels, repayment history, and many other factors.
More so, the credit score is mainly for evaluating whether a borrower will be able to repay loans in an agreed time.
Furthermore, the credit score was founded by the Fair Isaac Corporation also known as FICO.
The FICO score is the most popularly used credit scoring system. Although others were in existence before its creation.
This scoring system is widely used by many organizations and other financial institutions. A good credit score is generally considered to be 700 and above and the borrower receives a low-interest rate.
However, a credit score that’s greater than 800 is excellent and borrowers will receive a lower interest rate.
Factors for calculating a credit score -A Guide on How to Improve My Credit Scores
There’re 5 main factors used for evaluating and calculating a credit score. They are;
- Payment history.
- Types of credit.
- Length of credit history.
- The total amount of money owed.
- New credit.
Individual payment history counts for 35% of credit score which is for determining whether a borrower will pay his debt on time.
Furthermore, the type of credit used by a person counts for 10% of a credit score and it shows if a person has another unpaid credit.
This can be a car or mortgage loan, other credits such as a credit card.
Then, the length of credit history counts for 15% of a credit score with longer credit history which is seen as less risky.
However, the total amount owing counts for 30% and puts into consideration the percentage of credit available to a person that is presently being used which is also known as credit utilization.
More so, the new credit accounts for 10%, and it factors in the number of accounts a person has. And the number of accounts applied presently which may result in credit inquiries.
How often should you check your credit score?
You must ensure that you check your credit score always to check for errors but make sure that you do that via soft inquiries.
However, many banks and other financial institutions give their customers credit checks for free.
So, you can as well check it yourself to see if you can register for their services and get notified when your credit scores change.
Ways to improve your credit scores by 100 points within a period of 45 days
Listed below are the main ways by which you can increase your credit scores with great speed.
- Paying your bills on time
You must ensure that you pay your bill before the due dates.
However, you can do this by setting up automatic payments with your bank bills pay service.
More so, you can sign up for email notifications from your credit card company if you always have a problem paying your bills before the due date.
- Checking your credit reports always
Do you know that you can get a credit score from each of the listed credit reporting agencies?
These agencies include Equifax, Experian, and TransUnion which offers free credit once every [email protected] at annualcreditreport.com.
Therefore, you can easily check out for errors that lower your credit score and take necessary actions to correct them.
Also, you can as well review all the negative factors in the reports, and how to improve them which includes paying your bills on time and reducing every debt.
- Paying off any collections
Do you know that paying off your collection can help increase your credit scores?
In any case, you’ve to understand that any record of debt in your collection will appear in your credit report for seven years.
- Getting caught up on your past-due debt
You must ensure that you get as current as possible if you miss any bill payment.
However, any payment that you miss can greatly affect and lower your credit score as low as 100 points.
Therefore, it makes takes time for this black mark to clear from your credit score report but you don’t need to worry.
This is because your credit score depends solely on the present activity more than the previous credit problems.
- Make sure that you keep your credit cards balance low
The most popular rule of thumb states that you must keep your balance at or below 10% on every line of credit to increase your credit score.
Hence, a balance that’s near to or above the limit will drastically reduce your credit score.
- Learn how to pay off your debt rather than transferring it always
Do you know that the balance you transferred to pay zero interest or a lower interest on your debt can be invalid?
So, always make sure that you pay all the balance before you can now increase your debt load.
The FICO Company says that the best way to improve your credit score is by paying all your debt.
- Make sure that you don’t close a paid-off account
When you close an unused credit card account, it’ll lower your credit score and as well reduce your available credit.
Therefore, when you keep them open and unused shows that you can manage credit effectively.
So, think well before deactivating your old credit card account because a long credit history helps to improve your scores.
- Having different types of credit
The FICO Company loves to see consumers using both installment loans and credit cards.
So, if you’re repaying students loan or have a car loan or mortgage, you should have one or two credit cards.
Although, having many credit cards have its own negative effect, you should have at least one credit card as proof that you can handle credit effectively.
- Shopping for new credit over a short period of time
When applying or shopping for a mortgage, a car loan, or a credit card, the lender will check your credit report. The reason is to see if you’re qualified and also determine the rate they will charge you.
Therefore, too many inquiries can affect your credit score over a period of time.
- Applying for a new credit card occasionally
You’ve to make sure that you only apply for a credit card when you need them to help improve your available credit score.
However, opening many new credit card accounts in a short period can lower your existing credit score.
Increasing and improving your credit score is a nice goal to have especially if want to apply for a loan or make major purchases.
Such new purchases include a new car or home or qualifying for one of the best card rewards available.
However, it can take a long period of time to see a positive impact on your score when you take steps to change or improve it.
Nevertheless, you can employ assistance from one of the best credit repairs companies to remove the negative marks on your score.
Therefore, how soon you start working on your credit card the best result it’ll give you.
So, improve your credit score today and you’ll be glad you did.
I guess this article has solved your problem, please you can use the comment box if you’ve any other questions concerning this article.