Applying for a Loan? Use These 6 Simple Strategies to Fix Your Credit Score
by Arina Smith Loans & Credit 15 June 2018
Your credit score or credit rating is one of the most important factors affecting your eligibility for a personal credit card or personal loan. In addition to deciding whether or not a loan can be extended to you, this score also determines how much you can get, the repayment terms and how flexible the lender can be.
6 Simple Strategies to Fix Your Credit Score:
If you’re hoping to get a loan in the near future, apply these 6 techniques to improve your credit score:
1. Know Your Credit Rating:
Before you can start improving your score, you need to know what it is. Get a copy of your credit report, which is available once a year at no charge from all the major credit bureaus. Then, go through the report to understand the factors affecting your score, as well as any errors that may need correction.
2. Control Credit Card Debt:
Revolving credit or credit card limits, compared to existing debt or how much you’ve actually used, gives you a debt-to-credit ratio. This is another important factor in deciding your credit score, so try to keep it under 30%. Avoid maxing out your credit cards even if you pay them off in full every month.
3. Don’t Close Credit Accounts:
Holding on to old credit cards could improve your score, by providing a longer credit history and lowering your debt-to-credit ratio. Unused credit cards increase your revolving credit, and negative flags are spread out over your history. This is better than closing accounts and looking like a new borrower!
4. Avoid Debt Consolidation:
Consolidating your credit card debt onto another credit card is usually a bad idea unless it provides you with huge savings on interest and fees. Even then, it’s a better idea to spread out the debt over multiple low-interest cards instead of maxing out any of them or you can apply for a personal loan for debt consolidation.
5. Protect Against Fraud/Errors:
Identity theft and credit card fraud could affect your credit score as well, so keep your financial information safe. Review your credit report annually for errors or discrepancies, e.g. loan/credit card applications you didn’t make. Also, check your card statements regularly to identify errors or fraudulent use, and report these right away.
6. Be Consistent with Payments:
Pay off a credit card, utilities, mortgage or loan repayments, and other bills on time, without fail. Late payments are not only bad for your credit score, but also add interest and other charges to your total debt. Try to spread out bill payments before and after your credit card statement’s closing date, though, to keep from maxing out your limit.
A few small changes to the way you handle your finances, especially debt, can help you boost your credit score over the long term. Even if you aren’t looking for a loan right away, this helps your chances of getting approved for one later, and reduces the interest rates you’ll need to pay as well!
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