Tips on Improving Your Credit Score
Improving your credit score is not something that can be done in a few days.
Credit scores oftentimes require steady signs of improvement over a period of time in order to rise substantially.
In this article we will go through a few of the many ways in which a person can improve that credit score and to help you have a credit report that lenders will enjoy taking a look at rather than simply wanting it a little bit further away from their desk.
First step would be to pay those payments ON TIME.
Yes this is quite obvious, but many people either put the bill aside thinking it will get paid at some point, or don't even open the envelope at all after getting it in the mail! In most cases, it would be best to get that payment out as soon as possible.
This is about 35% of your credit score right here.
If you have any delinquent payments or reports from collections, you will have to remember that these will, unfortunately, remain on your credit report for about 7 years.
Avoid any late payments if it is at all possible.
This, obviously, will make a HUGE difference.
Amounts owed is the next largest factor in determining your credit score.
This consists of about 30% of your credit score.
The amount of money that you currently owed is actually compared to the amount of credit you still have available and presented in a ratio.
This way lenders can see what your current debt is and compare that to what a person is bringing in in order to calculate their risk of that person defaulting on the loan.
The best way to avoid any negative marks in this category is to pay off what you owe.
Many individuals may tell you that in this case a good idea would be to open new credit accounts in order to create more available credit so you don't look like you owe that much.
Believe me, lenders look at this too.
The big factor in this case is the length of your credit history which is the next big area covered in a credit report.
Lenders are very aware of most of the tactics a person may use to make themselves appear better than what they are financially.
They put a lot of weight into the length of your credit history and do not take it very lightly.
Newer accounts will obviously have a less than positive effect on your credit score so it would be a good idea to watch out for this potential pitfall.
In addition to the length of credit history, the next largest percentage of data considered is the amount of recent new account openings or credit inquiries that have occurred.
Now that big stretch of new credit to help make the amounts owed look a lot less just hit another area hard.
This is a very serious consideration for lenders as they will look to see if and how many other organizations a person has attempted to get credit from recently.
This puts up a number of red flags for lenders if they do see that there is indeed a string of new accounts and inquries.
So try to avoid unnecessary new accounts if possible.
When considering the new accounts that must be opened, the type of account opened will actually have some say as to what your credit score will be as well.
For example, financing on a new car stereo will have much less of an impact than, say, a $500,000 mortgage on a home.
Big difference.
The reporting companies take everything into consideration and in the financial world no account is treated equally.
They are all measured according to their financial significance.
Overall, the main thing to remember when trying to improve your credit is to keep in mind the five major parts of a credit report and try to make your credit decisions based on how they will affect each area.
If you have had a bankruptcy or collections reports and/or lost all credit.
There are programs which allow you to deposit the amount of money that you would like your balance to be as a "back up" for the credit card company.
Yes, you have to pay the money first and then use the card, but it does add a lot of convenience to making purchases again while helping improve your credit in order to have a much better credit score in the long run.
Credit scores oftentimes require steady signs of improvement over a period of time in order to rise substantially.
In this article we will go through a few of the many ways in which a person can improve that credit score and to help you have a credit report that lenders will enjoy taking a look at rather than simply wanting it a little bit further away from their desk.
First step would be to pay those payments ON TIME.
Yes this is quite obvious, but many people either put the bill aside thinking it will get paid at some point, or don't even open the envelope at all after getting it in the mail! In most cases, it would be best to get that payment out as soon as possible.
This is about 35% of your credit score right here.
If you have any delinquent payments or reports from collections, you will have to remember that these will, unfortunately, remain on your credit report for about 7 years.
Avoid any late payments if it is at all possible.
This, obviously, will make a HUGE difference.
Amounts owed is the next largest factor in determining your credit score.
This consists of about 30% of your credit score.
The amount of money that you currently owed is actually compared to the amount of credit you still have available and presented in a ratio.
This way lenders can see what your current debt is and compare that to what a person is bringing in in order to calculate their risk of that person defaulting on the loan.
The best way to avoid any negative marks in this category is to pay off what you owe.
Many individuals may tell you that in this case a good idea would be to open new credit accounts in order to create more available credit so you don't look like you owe that much.
Believe me, lenders look at this too.
The big factor in this case is the length of your credit history which is the next big area covered in a credit report.
Lenders are very aware of most of the tactics a person may use to make themselves appear better than what they are financially.
They put a lot of weight into the length of your credit history and do not take it very lightly.
Newer accounts will obviously have a less than positive effect on your credit score so it would be a good idea to watch out for this potential pitfall.
In addition to the length of credit history, the next largest percentage of data considered is the amount of recent new account openings or credit inquiries that have occurred.
Now that big stretch of new credit to help make the amounts owed look a lot less just hit another area hard.
This is a very serious consideration for lenders as they will look to see if and how many other organizations a person has attempted to get credit from recently.
This puts up a number of red flags for lenders if they do see that there is indeed a string of new accounts and inquries.
So try to avoid unnecessary new accounts if possible.
When considering the new accounts that must be opened, the type of account opened will actually have some say as to what your credit score will be as well.
For example, financing on a new car stereo will have much less of an impact than, say, a $500,000 mortgage on a home.
Big difference.
The reporting companies take everything into consideration and in the financial world no account is treated equally.
They are all measured according to their financial significance.
Overall, the main thing to remember when trying to improve your credit is to keep in mind the five major parts of a credit report and try to make your credit decisions based on how they will affect each area.
If you have had a bankruptcy or collections reports and/or lost all credit.
There are programs which allow you to deposit the amount of money that you would like your balance to be as a "back up" for the credit card company.
Yes, you have to pay the money first and then use the card, but it does add a lot of convenience to making purchases again while helping improve your credit in order to have a much better credit score in the long run.
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