Loans (Photo credit: zingbot)Your Credit score is a very important part of every American’s financial life. The Credit score, also known as a FICO score, is what most lenders use as a credit measuring scale. It plays a most significant role when it comes to applying for a loan or refinancing existing mortgage. If you’re planning to make any big purchase like a home or a car you must take care of your credit score and try to improve it as much as possible before applying for the loan.How to improve your FICO score
Discussed below are some effective tips on how to improve your credit score and become eligible for a loan with favorable loan terms and affordable interest rate.
1. Initiate early – Start repairing and fixing your credit errors way ahead of submitting a loan application. Credit reporting agencies often make mistakes in a consumer’s credit report. You must get copies of your credit report from the 3 leading credit bureaus namely TransUnion, Experian and Equifax, and find out if there are any discrepancies. You may find errors like a missed payment which was actually paid on time or a wrong balance. Dispute the errors with the concerning companies. You may need to furnish supporting documents to get it fixed. Initiate the process as early as possible because it may take a couple of months to get your report fixed. Correcting your credit report would help you improve the FICO score radically.
2. Reduce credit utilization – Credit utilization can be described as the ratio between the credit card balance and credit limit. This is a very significant part of your credit score. Lowering the credit utilization ratio and thus your credit card balance would help you improve your overall credit score remarkably. A 30% ratio would be considered standard. However, don’t close existing credit card accounts hurriedly as it may take some of your credit limit and thus make the ratio ascend. You may ask for a credit limit increase to reduce credit utilization; provided you don’t have a high balance or any red flags. If you have a clean credit history, your creditor is likely to increase your credit limit. But you must use your credit limit judiciously to avoid worsening the situation.
3. Make on time payments – You must pay your bills and make all payments on time to prove your credit worthiness. Even a single missed payment can take 100 points off your credit score. Be careful about your bills, especially medical bills, which may end up in collections. Medical bills often go unpaid and end up in collections. As a result, you may not even know about them until you see it on your report. Therefore, if you don’t get a bill after you've seen a doctor, you must call the concerning authority and ask them about the bill to avoid a missed payment and thus a reduction in credit score.
4. Stay with your current employer, if possible – Job hopping often leaves a bad impression while it comes to your credit profile and credit score. Try to avoid a job change, especially while you’re in anticipation of a mortgage, buy to let mortgages or car loan application. Until your loan is serviced, don’t opt for changing your job and don’t let the lender consider you as a high-risk borrower.
Author’s Bio – Jasmine Jones is the editor chief at Emortgagecalculator.co.uk. She keeps telling her clients to save money and introduce frugality into their life.
Well, I think that it's never too late to workon your credit score. I know some people who guess thar the can not do nothing else to improve it, buu they are wrong. There are financial mistakes that it's possible to fix. And it's all worth efforts, because a credit score is one of the most important financial tools today, if a credit score is low it will be hard to get a loan with low interest rates and get any profitable offers from the lenders.
ReplyDeleteIt's easy to mess up your score but it takes a long time to correct it.
ReplyDelete