How to improve credit score

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How to improve credit score

4th October 2009

The first thing that lenders will check when you apply for a loan - whether a loan, mortgage or credit card purchase - is your credit score. That's because, before they decide to lend you money, they want to know your risk level.

Lenders are business people and as businessmen they always bear in mind the risks when they invest. The investment is in you, of course. Or, more precisely, your ability to pay. If the risk is much higher than the investment, naturally the lenders will turn away from such a transaction.

Credit score helps lenders make their decisions easier and faster. Because your credit score is closest to accurate information in determining your future lending activities, they base their decisions regarding your credit application on these three digits.

In short, your loan is what will make or break your credit application.

For this reason, many consumers have decided to take steps to learn how to improve credit scores. Even if you already have a good credit standing with lenders, it still pays to learn more about how to improve credit scores even further. A good credit score can help to ensure you get the most favourable interest rates. How much more if you have a nearly perfect credit score?

Here are some steps to help to improve a credit score:

Improve your payment history

Paying your bills on time is the first order of the day when it comes to learning how to improve credit score. Even some delays in your payment history might take 100 points to your credit score. That is why it is essential that you be punctual in making payments. Lenders value punctuality in payments made above all.

Keep debt to a Minimum

The next step in exploring ways to improve credit score is to reduce debts. Your credit rating is calculated in part by comparing loan balance outstanding on your loan. If you have more credit and less debts, it will reflect positively on your credit report. However, if you have more debt than you have available credit, it could drag its rate right down.

One way to keep debt to a minimum is to keep your credit card balances low. Moreover, don't close those unused accounts just yet because even a zero balance may help you on how to improve credit scores. Do not open new accounts either as this could lower your credit-to-debt ratio.

The length of your credit history

Typically, short credit history can mean a low credit score. But once you learn how to improve credit score, you'll find that, even if you have only three years of credit history, it would have only a minimal impact on your credit score, as long as you follow the above given advice .


Posted in Credit rating

 
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