Your credit score is a significant factor that can determine your loan approval. It is vital to have a high credit rating to access loans when the need arises. But don't worry if you have a low credit score because there are ways to improve it. Keep reading to learn how to enhance your credit score.
Settle Your Bills on Time
People who pay bills a few days late have a low credit score. When lenders review your credit report, they usually start with the days when you pay your bills. Payment history is generally considered an excellent indicator of future performance. Paying late or paying less than what is expected can negatively affect your credit score, and in turn, lower your chances of getting a loan. It is safe to set up payment reminders on your calendar or phone to ensure you don't forget to make payments.
Pay Outstanding Debts on Time
Paying debts on time is also essential if you want to build a better credit score. Loans such as student loans, mortgages, or equipment financing, among others, should be paid on time, as stated on the agreement. If you go against the contract and don't pay debts, you will have a low credit score. Paying loans on time can help raise your credit score quickly.
Work With an Expert
If you don't know how to improve your credit score on your own, you should consider working with an expert. Crediful has helped many clients repair their credit. The financial experts help you understand your credit score and take the right steps to improve it. Also, they can help you get rid of inaccuracies on your report and issues such as bankruptcies, collections, foreclosures, and repossessions, among others.
Manage Your Credit Utilization
It is vital to keep tabs on your credit utilization rate. This is because too much credit usage lowers your scores. Use cash to pay bills that you can manage. Avoid using your credit card all the time. It is advisable to have a less than 10 percent credit utilization rate if you want to have a high credit score. The utilization rate that appears on your credit issuer reports significantly influences score. If it is more than 10 percent, you need to manage your use of credit options. Aim for 30 percent credit utilization at first and then get yourself under 10 percent with time.
Check for Any Errors
Calculation of credit scores is done by people who can make errors. You are entitled to one credit report yearly, and therefore it is essential to get one and go through it. Ensure that the financial figures and dates on the report are right. If you spot an error, contact your credit reporting agency with supporting evidence. The error will get fixed, and your credit rating will improve. This is especially important for people who pay bills and debts on time but still can't understand why they have a low credit score.
Contact Your Creditors
Another damage control tip is calling your creditors. If you forgot to make monthly payments or cannot afford to pay creditors, it is crucial to call them. The creditors may extend the deadline for you, or they can come with a solution that will work for both parties. When you neither pay nor communicate, creditors will immediately give you a low credit. Talking honestly with them might save you the negatives of late payment.
Leave Old Debts
What most people don’t know is that old debts are sometimes "charged off" by creditors. This means that the debt is accounted for as bad debt, and it is no longer recognized. It is advisable to leave written off debts too. But you need to make sure it is written off first. If you make a payment on a charged off account, you will reactivate the debt, and this could eventually lower your credit score. Therefore, be careful not to pay very old debts that were written off.
Keep Your Old Accounts Open
The older your credit history, the higher your credit score will be. Therefore, don’t close old accounts, even if you are not using them.
Take Small Loans
If you have a low credit score, your chances of getting huge loans are usually low. A solution to this is taking small loans that you can repay quickly. The lenders will report to credit agencies that you are a good payer, which will earn you a positive rating. With time, your credit score will significantly improve.
Building a good credit report is crucial for easy access to loans. The tips in this guide can help you improve your credit rating within a short time.
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