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6 Steps to Improve Your Credit Score

A good credit score is a favorable factor and brings a major boost in getting your application’s approval. Credit scores are the basis of qualification of financial companies in approving applications for loans, credit cards, and many others. Sometimes, it is also used as a factor in giving affordable interest rates and insurance premiums.

If you have a plan to apply for a loan or credit card and to land the best interest rates, now is the time to improve your credit scores.

Credit scores range from 300 as the lowest to 850 as the highest. According to credit score creator FICO, lenders regard credit scores between 800 to 850 as exceptional.

If your credit score is below 800, you need to improve your credit score to maintain a nice standing among possible lenders and have a swift application in the future.

Here are six simple tips to help you amp up your scores:

Check credit report

Lenders use different credit scores from credit bureaus to assess your credit report. A credit score is not just limited to one. Multiple credit scores are commercially available that vary depending on the type of loans you intend to apply.

You may check your credit reports from three leading credit bureau—Equifax, TransUnion, and Experian. It is important to check your credit report as there may have been fraud and credit reporting mistakes that may happen. Federal laws let you dispute these mistakes with the credit bureau’s verification so your credit scores can improve.

Never miss payments

FICO records your payment history, and it affects 35 percent of your credit score. Your paying behavior majorly affects your credit score. Pay your monthly dues on time, and be responsible for your deadlines.

FICO also underscores the importance of avoiding late payments, closing of accounts, and third-party collections. To avoid late payments, you can opt for automatic debit of your payments on your account.

Lower credit utilization rate

Your credit utilization ratio is the relationship between your credit card balance and your credit limits. When you pay your balances, you also lower your utilization ratio. This can improve your credit score immediately. To maintain the right utilization rate, pay your balances in full monthly, and ask your credit card issuer to give you a higher credit limit.

Seek for help

The length of credit history is a significant factor in improving your credit score. FICO bases 15 percent of your score on the length of your oldest account and your average age of all your accounts. The older the average is, the better. While you need to wait for a while for this to help improve your credit score, asking for a friend or family member who already has a long credit history is a big push.

You may ask them to add you as an authorized user of their existing credit card. Of course, seek someone who maintains a good credit history such as on-time payments and low credit utilization. Remember to be careful about engaging in fraudulent activities involving this practice.

Self-report

When you have exhausted all the possibilities mentioned above, there is another way to pull your credit score higher.

With the help of Experian Boost and UltraFICO, which offer two free programs to boost credit scores, you can add information to your credit card by self-reporting. To do this, you have to connect your online banking data and allow the credit bureau to add telecommunications and utility payment history to your report. You have the option of self-reporting accounts with positive payment history only.

Avoid applying for other credit cards

Every time you apply for a new credit card, it is recorded on your credit report. Avoid applying for credit cards in a short period or when you are about to apply for a big loan. However, if you badly need to apply for a new line of credit, do your research on your probability of approval to prevent risking your current credit score. Every time your application is denied, it leaves a red flag that likely to affect your credit score.

Earning an exceptional credit score is not something you can achieve immediately. It takes time to earn a good standing, and how you manage your existing credit card greatly affects your score. Being a good payer and maintaining a low utilization rate will eventually improve your credit score over time.

Based on Materials from Bankrate.com
Photo Credits:
CafeCredit.com/Flickr
CafeCredit.com/Flickr
CafeCredit.com/Flickr

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