14 Feb 2017   /   0 comments

Tips to Improve Your Credit Score

Paul

Do you need tips to improve your credit score? Well, we can help you out with that. There are several key factors that go into determining an individual’s credit score. And that score has a huge impact on an individual’s ability to obtain a loan from any kind of banking institution. So, it is incredibly important to ensure that we always meet the minimum requirements for a good credit score and resolve any outstanding issues that may cause a low score or a negative report.

Out of all the variables that come into play when determining your credit score, pay special attention to the following:

Do not incur defaults

This is undoubtedly the factor that will have the greatest effect on your credit in the long term. You need to pay each and every loan installment or credit card bill on time every month. The more payments you make on time the higher score you will have, and vice versa: the more late payments you make or don’t make at all the lower your score will become.

This is calculated into your score at varying percentages with the most recent late payments affecting the score the most while those that were late two years ago, do not have as high of an impact.

Additionally, a default is a very serious blow to your credit report that will decrease your credit score quickly. Be sure to keep up with all your pending payments and after you do so, it will reflect positively on your personal credit rating. If the payment delays are due to lack of resources, don’t allow them to become defaults. You can do this by negotiating with your bank, credit card company, or lender. If you describe your situation before the problem occurs they will be more likely to act sympathetically towards you. You can propose a way to alter the agreement slightly so the payments are more affordable for you. They want you to succeed in the loan because, otherwise, they lose money. You may have the opportunity to extend the loan period to lower the monthly fees or to agree to a grace period where you are exempt from amortizing your loan and simply commit to pay interest for a while.

Do not use up your credit card balance

The second most impactful factor in your credit score is the percentage of your credit balance is used. Obviously, the greater amount you owe, the more problems you will have when applying for a new loan or credit card.

The most common example of this is credit cards. If you are using 80% of your credit limit at all times, then it will not reflect kindly on your score. You want to keep your use of credit cards at 30% of the available balance. To avoid this, pay higher than the minimum payments each month and don’t use your credit cards that often.

Pay credit card debt off faster

Most of us are aware that once you use up a large amount of your credit card’s balance, you have two options: pay small incremental payments over many months or pay the whole, or large portion, of the balance the next month.

The latter option has significantly more advantages than it might seem. By paying more at once, you will avoid tons of monthly interest charges and you will feel lighter with less debt. But the way in which you pay off your card is just as important as the action of paying it off to the calculation of your credit score.

Your credit score will increase substantially, sometimes as fast as the next month, if you are able to pay off a credit card balance right away. From good to bad, in that order, these are the options for paying off your cards:

  • Immediate payment of all your credit card debt
  • Incremental payments that are slightly higher than the monthly minimum payments
  • Incremental payments that are just equal to the monthly minimum payments

Don’t get a loan until you’re sure you need it

Banks will always look to see what state your credit is in before approving you for a loan, as will credit card companies. Each and everyone one of these “credit inquiries” are registered and negatively affect your score. They have a harmful impact because they make you appear as if you are desperate for more and more credit.

The wisest thing you can do is research the conditions and terms for your loan before applying for one to avoid credit inquiries for loans or credit that you may not qualify for or even want. The more applications you send out to different banks or lenders, the more credit inquiries you will have on your credit report in a very short amount of time. But with a little research on your part, you can determine which bank or lender best suits your needs so you can go directly to the best option and only have one inquiry on your report.

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