Nov 23, 2017

If you want to secure financing then you’re going to need a good credit score. Whether you need a loan for a car, or a mortgage on your home, a good credit score helps you get approved. Unfortunately some people have bad credit scores. Here are five top tips for improving your credit score today.

 1.     Keep Your Credit Balances as Low as Possible

Your FICO scores, the scoring method most often used by lenders, makes up a good 30% of your credit score based on the money you currently owe. To improve your credit score you should only be using around 10% of your credit availability. So if your credit card has a $5000 limit then you shouldn’t have an outstanding balance over $500. It’s pretty easy to work out how much of your credit you’re using. Just take your balance and divide it by the limit on your credit card/account.

 While you might think a financial company would love people to use as much credit as possible and bring in more money for the company, they also punish customers by damaging their credit scores if they do so. Avoid maxing out credit cards and keep your credit spending to a minimum. The less you use your credit cards the better your credit score becomes.

 2.     Don’t Buy Things on Impulse

Everyone can benefit from a little impulsiveness, except for when it comes to repairing credit scores. Making quick decisions can really damage your credit score in the long term. One common tactic seen nowadays is promises of a discount on purchases through store credit cards.

 If you take a store up on the offer of a credit card you could end up with too many credit cards and a poor credit rating as a result. You come across as someone who depends on the borrowed money to get by. That’s someone people don’t want to lend their money to. If you constantly use credit it looks like you don’t have any money of your own. Credit companies lend you money in the belief you will pay it back. If you don’t look like you have the means to pay them back you won’t get their money.

 3.     Try to Find Report Errors

The only person responsible for finding problems and errors on your annual credit report is you. It’s especially important with so many people analysing your credit and judging your ability to pay from it.

You need to report any mistakes you spot on the report as soon as you can. The Federal Trade Commission has a mandate saying that any error reported by a consumer has to be investigated within 30 days of receiving the correction request.

 4.     Always Pay on Time

Not paying your bills on time is going to be the biggest damager to your credit score. Your ability to pay on time determines 35% of your FICO score. Paying late and missing payments completely can seriously damage your credit score.

 Keep up to date with payment due dates and schedule payments so that they always get made well before the deadline. Alert a creditor if you will be unable to pay them on time and arrange alternatives to try and mitigate the damage.

 5.     Keep up to Date With All Your Credit Scores

There is more to whether a creditor will approve you than just your FICO score. The main three credit reporting bureaus – TransUnion, Equifax and Experian – came together and created a scoring model all of their own. They call it the VantageScore.

While creditors will typically use FICO to determine your ability to pay, it helps to also know your VantageScore. Improving your VantageScore can help improve how you look to creditors, especially the ones that use VantageScore. Keeping track of your VantageScore can also help you understand what your strengths and weaknesses are. With that information you can adjust your tactics accordingly and make better choices in the future. 

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