In the present age, it has become a necessity to know how to raise your credit score. The credit score indicates someone’s creditworthiness to potential insurance companies, lenders, banks employers, etc. It is based on information obtained from credit bureaus. Hence, the higher one’s score the better.
In order to evaluate potential risk in lending money to consumers, lenders use credit scores. The score helps banks and credit card companies to mitigate losses due to bad debt. The credit scores are used to determine which customers can earn companies more income, who qualifies for a loan, the credit limits and the interest rate, etc.
Akin to banks, organizations like government departments, insurance and mobile phone companies also capitalize on the same techniques while lending money.
Keeping in mind the importance of an improved score, there are a number of ways and measures being discussed regarding how to raise your credit score:
Repayment of debts:
A known way of how to raise your credit score is the reimbursement of debts, which can improve one’s credit score by almost 30 per cent. However, at times, non-payment of a debt is due to lack of resources; in such a case, one can sell some of their possessions to help repay dues.
Credit card dealings:
Sometimes purchases through a credit card can aggravate a credit situation. Hence, it is necessary to stop accumulating more debt by making credit card purchases.
It is also important to know which accounts need work and which are just fine. For the purpose, you must get a copy of credit report from major credit bureaus so that you appraise the situation.
Many of the creditors have some short-term schemes to help reduce your monthly payments until you are able to handle the situation. So, you must talk to your creditor who may be of help with regard to your situation.
Leaving accounts open:
A person sometimes thinks that closing a credit card account may help him but it, on the contrary, may have negative effects on his or her credit.
Application for credit card:
In case a credit is in repair mode and one makes more applications for credit, there is a possibility that they will be rejected. Hence, their application could negatively affect your credit score.
Past due balance:
Taking care of delinquent accounts is vital as someone’s payment history makes up 35 per cent of their credit score.
Avoid maxing out cards: Even if one pays off in full every month, it is necessary to keep balances below 30 percent of one’s credit limit. One should not accumulate balance exceeding $900 if they have a card with a $3,000 credit limit.
Loan shopping: Because one’s credit score gets pulled while they shop for a loan, applications to potential lenders should be filed within a two-week period.
Credit report errors:
You have the right to remove any error that your credit report contains. Removal of inaccurate or incorrect information from the report will definitely be another way of how to raise your credit score.