Your credit score can ultimately be the deciding factor for whether or not you get approval for things such as loans and mortgages. It is a three-digit number most lenders will use to help them make a decision on whether or not to approve you to borrow from them. To lenders, a credit score is […]
Your credit score can ultimately be the deciding factor for whether or not you get approval for things such as loans and mortgages. It is a three-digit number most lenders will use to help them make a decision on whether or not to approve you to borrow from them. To lenders, a credit score is an indicator of how likely a borrower is expected to repay their loans. The higher your credit score is, the better the chances are you will qualify for most credit cards and loans with favorable interest rates.
If your credit score is lower than you would like it to be, you should know you’re not alone. Improving your credit score and history will take time, but the quicker you address any issues affecting your score, the quicker your scores will begin to increase. There are several ways to build your credit score up such as paying down debts, paying bills on time and checking your credit report for any inaccuracies.
How Credit Scores Get Calculated
It is very likely that each person has dozens of credit scores. In some cases, a person might have hundreds of scores linked to their credit history. This is because credit scores are calculated based on applying mathematical algorithms to your personal information found within the three major credit reports. Different lenders use different algorithms to compute scores. There is no need to get upset over this fact.
Typically, the same factors that make your score go up or down in one algorithm are the same for every algorithm used. Most algorithm scoring models take into account borrowers’ payment histories for any credit cards and loans they have taken out. It is also based on the revolving credit you use regularly, the types of accounts you have opened and how long those accounts have been in good standing.
Tips For Improving Your Credit Score
Building and improving your credit score starts with checking your scores online regularly. When you are able to review your scores and credit report, you will obtain information about what factors are affecting your credit scores the most. These are where you will begin to start improving your credit. Any changes you make will take some time before showing up on your credit report. There are many things you can do to start raising your credit score. Credit scores often reflect payment patterns over time. However, more emphasis is placed on recent information.
1. Pay All Bills On Time
One of the most important things you can do to raise your credit score is by paying all of your bills on time. When a lender reviews your credit score and credit report, they’re most interested in how reliable you are with paying your bills by the due dates.
This is true because past payment performance is typically a good indicator of how well you will pay your bills in the future. Stay on track with your bills as best as possible. Try not to fret if you miss one or two payments here and there. Bring all bills current as soon as you’re able to because missed payments have less effect on your credit scores over time.
2. Try Experian Boost For Non-Credit Accounts
If you are looking for a new way to raise your credit score, consider using a free product from Experian called Boost. This new product allows consumers to connect their bank account to show proof of making on-time payments for utility bills and cell phone bills. When you sign up for the free Experian membership online, you can receive your free FICO Score and credit report immediately.
3. Pay Debts Down And Keep Balances Low On Credit Cards And Revolving Credit Accounts
Another important factor that goes into your credit score is your credit utilization ratio. This ratio gets calculated by adding up all of the balances you have on your credit cards and dividing that amount by your full credit limit available. Most lenders favor consumers who keep their ratios at 30-percent use or less. This shows lenders you don’t often max out your credit cards and revolving credit accounts.
4. Apply For New Credit Only When Needed
Another tip for building your credit score is not opening new credit accounts unless you need to. Having too many unnecessary credit cards and accounts on your report can harm your score. Lenders may see this as an unnecessary temptation to overspend and accumulate extra debt.
5. Keep Unused Credit Accounts Open
If you have credit card accounts with no annual fees and no balances, keep them open on your report. Closing accounts you no longer use can negatively affect your score because it can increase the ratio of your credit utilization. Owing the same amount of debt across fewer opened credit card accounts can lower your score.
6. Keep Applications For New Credit To A Minimum
While opening new credit cards can positively increase your overall credit limit, the application itself to apply for credit will result in a hard inquiry being placed on your credit report. Having too many hard inquiries placed on your report in a short amount of time can affect your score. Most inquiries will remain on your credit report for up to two years.
7. Dispute Inaccuracies
If you find any inaccuracies while routinely checking your credit report, be sure you dispute the information you find. Having incorrect information on any of your credit reports can significantly lower your scores.
How Long Will It Take To Rebuild A Credit Score?
When it comes to building your credit score up, there are no quick fixes to help. The length of time it will take to raise a credit score and rebuild credit history depends on the specifics involved in lowering your score. Most delinquencies will remain on credit reports for seven years. Hard inquiries from applying for credit will remain on a credit report for two years. Any public record items can remain on your report between seven and ten years. There are no shortcuts to building your credit history.