You are looking for a mortgage or another type of loan, but you are constantly refused. Or, you get a loan offer, but the interest rate is staggering.
Most likely, your credit score is the culprit.
The higher your score, the better your chances of getting a loan and the better your rates and terms. Here’s how to quickly improve your credit score so you can get the loan you need.
Check for errors on your credit report
If you have regularly paid your bills on time and have never had problems with lenders or credit card companies, but your credit score is low, there may be an error. in your credit report.
According to a 2012 Federal Trade Commission study, about 25% of people had an error on their credit report, which negatively affected their score.
Credit reporting agencies corrected errors for about 20% of consumers who reported them, while about 1% of those who reported errors saw their credit score change after the errors were corrected. In some cases, individual scores increased by 25 points. In very rare cases (1 in 250), a person’s score increased by more than 100 points.
You are allowed to view your credit report for free once a year from each of the three credit bureaus – Equifax, Experian and TransUnion. You can access your free credit reports by visiting AnnualCreditReport.com.
Start paying on time
You can’t always blame the credit bureaus for a low credit score. In some cases, a low score is the result of your payment habits. Your payment history has a big effect on your score.
According to Fair Isaac Corp., which calculates the FICO score, payment history accounts for 35% of your score. If you’re not already in the habit of paying your debts on time, it can quickly improve your credit score.
Keep the sales low
How much you owe represents 30 percent of your FICO score. The less you owe compared to what you could borrow, the higher your score.
One tip is to settle your balances before your credit card statement closing date. If you charge $1,000 to a card in a month, but pay the balance in full before the end of the statement period, the credit card will show that you owe nothing, making it look like you do not use your credit at all.
Even if you can’t pay off the full balance by the statement closing date, try to keep the amount you charge to less than 30% of the available credit amount. This means that if your limit is $10,000, you don’t want to charge more than $3,000 in a single billing period. Keeping your balance below 10% of your total available credit will further improve your credit score.
Beware of New Credits
Your credit score drops a little each time you open a new credit card or other account. If you’re wondering how to improve your credit score fast, one option is to be careful when opening new accounts or new cards.
The only exception to this rule is if you don’t have a lot of credit history and need a credit card to get started. In some cases, opening a new account can help improve your credit mix, increasing your score in the long run. Opening new credit accounts only when absolutely necessary will help improve and maintain your credit score.
Also, be careful about closing any credit cards you’ve paid for, as this can lower your credit score. Closing a card causes your available credit to drop, reducing your borrowing power.
A good credit score is above 700. Very good scores are above 740 and exceptional scores are above 800. Raising your scores after a blot on your credit report or establishing your credit for the first time will take patience. and discipline. You can expect it to take a few months to two years to establish a good credit rating, but you can speed up improvement by following Bankrate’s strategy.