Credit Score and five tips on how to improve it.
Credit score is one the most important items that reflect to potential lenders your credit behavior. After all, if you need to get a loan to purchase a home or car, lease a car, rent an apartment, or engage in any type of major financial transaction, the lender or property owner will very likely want to know your credit worthiness. They do this by asking your permission to run your credit report from one of the three credit bureaus and review your fico score.
Fico stands for Fair Isaac Corporation. The organization was founded by Bill Fair and Earl Isaac in 1956 and is based in San Jose, CA. They came up with this fico score analysis and how to run it, and we know that it does carry a lot of weight on how lenders evaluate loan applications.
There are many elements to one’s financial success, and one of the most important ones is knowing your credit score and the benefits of excellent credit, and knowing how to increase it.
Here are four tips on how you can increase your credit score:
The credit score runs between 300 and 850. Statistics from Experian show that 66% of Americans have a good fico score or better.
1: Review your credit report and fico score.
You can run a free copy of your credit report from annualcreditreport.com and check your score. Each person is entitled to run this report by each of the credit bureau at least once a year.
If you do not mind paying for a three-in-one credit report that cost approximately $30-$40 dollars, you can also do that. Experian and Privacy Guard offer that. Also, many other organizations can run the three-in-one credit report. This allow you to review each bureau side by side and it’s very easy to spot any errors that one bureau may have versus the other bureaus and ask them to correct them. First, review the credit report and confirm it is accurate. Then, once the review of the score is complete, you can use some basic strategies to improve your credit score. For instance, pay your bills on time so that late payments don’t impact your score.
2: Monitor how much of your credit line you are using.
If you’re using over 50% of your credit line, analyze which ones you can start paying down now and get the balances below 50%. Always pay above the minimum amount if you can. That little extra amount would go a long way into driving down the credit line below the 50% mark. It will also save you a lot in interest payments.
Review how much of your total credit line you’re using. For instance, if you have 20k in credit line and you’re using 15k that would negatively impact your score. You can probably apply for another card, and do a transfer from a higher interest card to the new card. Most times these new offers cards come with 0 interests for 12-18 months. . If you get approved for another 5k, this would now show that you’re credit worthy. You’ll be using only 60% of your credit line versus 75%.
- Pay Bills on Time
This cannot stress enough how important paying bills on time is. If you review your credit report, you’ll that each creditor marked OK if you paid your bills on time and LATE if you paid late. This is critical because, even if you’re late by error, it can become a hassle to clear this from your credit report. Most department stores and major credit card report monthly to the major credit card bureaus, so you want to be diligent about paying your bills on time.
- Do not close out old cards
After you’ve paid off some cards and don’t wish to use them anymore, you can freeze them. Some major cards have an option to do that. So, if you’re sure you don’t want to use it in a while, you can opt in for that. Also, you can remove them from your wallet so you’re not tempted to use the card and add more debt. It can be tempting to just close the card, but if you do that, your entire credit line will shrink and this would suddenly increase the percentage of your credit line that you’re using. Also, it would reduce your credit history, which is factored in your credit score, especially if it’s an old card.
No matter what your score is, you can improve it by taking these simple steps. Also, seek out additional ways to improve your score and make it a goal to work toward. After all, one of the important financial cornerstones of financial success is knowing the benefits of having excellent credit.
No matter where you are, you can start that improvement process and reap the rewards of excellent credit.
Published by Believe and Inspire Team