While your credit score is just a 3-digit number, it will determine whether lenders will grant a loan. The higher the number, the better your chance is for achieving a positive outcome. Excessive amounts of debt, late payments, and annual earnings all play a contributing role in the final number. Thankfully, if your credit score is low, there are several ways to improve it.
The Calculation Process
There are three reporting agencies that lenders rely on. The final credit score number derives from your personal payment history, use of revolving credit, length of open accounts, types of credit acquired, and the number of inquiries made about your credit history.
Excessive Debt
Having some debt, such as a mortgage, a car payment, and a couple of credit cards, can work in your favor if the accounts are current. However, misuse of credit cards can lower your score significantly. To a potential lender, it portrays you as a high risk. Maintaining low balances on credit cards, less than a third of the available balance, will keep your score in good standing. If you currently have cards at or near their credit limits, make it a priority to reduce them. If you are applying for a large ticket item and you need to improve your score quickly, paying them down now is essential. If you don’t currently have the funds, you can borrow from a relative or take out a small loan. Personal loans in Albuquerque are available to the people who live there. With some searching, you can probably find personal loans in your local area, as well.
Timely Payments
The system is not fair. You can work hard for years making every payment on time and then have a financial setback that causes a few late payments. Suddenly, your credit score is much lower. Unfortunately, creditors use the payment history as a way of determining the likeliness of repaying a future loan. However, if the late payments are limited to a small time frame, you can explain the reason and in many cases, a lender will take that into consideration. If your bills are behind, use every means necessary to bring them to a current status.
Limit Applications to a Select Few
Every time someone pulls your credit, it’s recorded. If you are applying for a loan for a home, let a mortgage broker find the best rates. If you do it alone, you’ll end up with a lower score. If you want to avoid broker fees and find a lender yourself, research companies first and then apply only to a select few. Unfortunately, the inquiries remain for up to 7 years.
Check Your Credit Annually
Sometimes, a lower score can result from an error. However, if you don’t review the report, you won’t know about it, that is until you need to buy something on credit. Inaccuracies are not uncommon. If you discover something that’s incorrect, contact the credit bureau to straighten it out. Keeping track of your credit will eliminate any future credit problems.
Your credit score is very important. Paying bills by their due dates, keeping revolving credit limits low, and utilizing credit wisely will all help you achieve and maintain a good score.
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