Improve credit score is the determining factor on any loan application as it gives an idea to the lender whether they have to give a loan or not. The credit score is determined with various factors such as payment history, a mix of credit accounts, amount of debts, etc. If you have a good credit score then there is a higher chance that you will get loan approval and favorable rates. But if your score is not good then you need to improve your credit score. Well changing it, doesn’t happen overnight it takes time and required steps to improve it. So it is better to start immediately.
Well, credit scores can be determined by various score models. FICO and VantageScore are the most common scales. credit scoring models have various scales ranges from 300 to 850. Let’s take one of the scoring models i.e. FIOC. FICO’s score of 670 is considered as good. Here how the FICO score ranges:
- 800 to 850: Exceptional (19.9% of all people)
- 740 to 799: Very good (18.2%)
- 670 to 739: Good (21.5%)
- 580 to 669: Fair (20.2%)
- 300 to 579: Very poor (17%)
Steps to Improve Credit Score
Here are steps that will help you to improve your score and take loans having favorable rates. The following are-
Check your credit risks
It is suggested that you should check your credit report to any of the credit reporting agencies. When you see your reports, it comes with a list of risk factors. This will give you an idea and a good starting point on what areas you need to improve credit score and on which part you need more attention. So, check your credit history and know your risk.
So that you will come to know that these risks lowering your score
Pay your bills on time
It carries 35% of your credit score. Your payment history is an important factor in determining credit scores. Lenders take an idea form your score. They don’t want to lend money to a person who has late or miss-payments in their history. Paying a bill more than 30 days late or mispayments can drop your credit score. One single miss or late payment can lead to a loss of 100 points.
So it is advisable that take that much credit which you can handle. Pay all your bills on time. If you forgot then set reminders before 6-7 days before the last date so that you can manage efficiently. Arrange the necessary amount for payment in advance.
Manage your debts
It is better to keep the credit balance low so that you can boost your credit balance. It carries 30% of your credit score. So, for a good score, you need to try to use less than 30% of your available credit. It is even better if you can manage less than 10% of your available credit.
To control your spendings, you need to make a list of all your credit accounts and their interest rates. This will make it easier for you to make a good plan that focuses on paying down the debts. By doing this it will help you to pay off your debts as well as less addition of other debts. You can also take the help of an adviser so that you can get the best plan.
Open a credit card
If you don’t have any credit card, then you can take it. It will improve credit score as without it lacks from the credit mix factor. There’s no need to have a wallet full of credit cards, but having one or two that you use responsibly will help your score. Make any small purchase each month and paying it off from that credit card
It carries 10% of your credit score. It is advisable to have a mix of installments loans and revolving credit accounts.
Good credit scores need time and effort to do. If there is any negative mark then it stays up to 7 years in your credit report. They will have less of an impact on your scores by age. But it is good to include positive information in your credit report until your negative information to take off.
It carries 10 % of your credit score. It depends on how often you apply for new credit so it is advisable to limit it. because if you apply multiple accounts in a short span of time then you are at greater credit risk. This credit application generates a hard inquiry which can have a small and negative effect on your credit score.it generally shows within the first six months it’s on your credit report. you can have serious credit damage if you have seven hard inquiries in a short period of time. So be careful with this.
The following tips will not only save your money but also helps to maintain a good credit score in the future. If you have a bad credit score then don’t give up on credit entirely. instead, you should search for improving your scores so that you can get a loan without any complications and with favorable interest.