Almost every person is familiar with what a credit score is. Everyone has them, as long as you have taken out some form of a loan, whether it be a car loan, school loan, home loan or a credit card.
Stated by a credit repair dallas company, you know that your credit score is important and that the higher it is, the more likely you will be to get approved for a loan you want (such as for a car or a home) and the lower your interest rate (and monthly payment) will be.
But not many people know exactly what goes into determining your credit score and how they can improve it.
If your score is lower than you’d like, you may be denied for a loan that is necessary to help you live your life the way you want to. Don’t worry, though; your credit score is a number that is constantly changing.
Here’s how to raise your credit score.
Pay All Your Bills on Time
The more reliable you are as a borrower, the more likely a new creditor is to lend you money. It makes a lot of sense when you think about it.
It’s hard for a lender to know accurately predict the future and know whether you’ll pay them back when your payments are due. The only way they can try to make this determination is to look at your payment history. If you are often late on payments or miss payments entirely, you are going to be labeled as risky.
One of the easiest and quickest ways to increase your credit scores is to catch up on any bills that you are behind on, and then make all of your outstanding debt payments on time going forward.
Pay Off Loans and Keep Your Revolving Credit Balances Low
There are two main types of credit – term loans and revolving credit.
Car loans, home loans, and personal loans are all examples of term loans. There is a specific period over which you are required to pay back the loan (such as a 60-month car loan) and you have a set payment required each month. When you come to the end of the term, your loan is paid off and you own the item associated with the loan outright.
Credit cards are the main form of revolving credit. You have a pre-set credit card limit on how much you can charge. Your balance will fluctuate based on how much you charge and pay-off, and your monthly payment will fluctuate as a result as well.
A great way to raise your credit score is to pay off as many of your term loans as possible and keep the balance low on any revolving credit you have.
One other piece of advice: Don’t close those credit cards you paid off unless they charge an annual fee. That could hurt your ratio of credit utilization, which could hurt your credit score.
Limit Your Applications
Each time you apply for a new line of credit, no matter what type of loan it is and for what purpose, it will result in your credit report getting dinged with a hard inquiry. While opening a new credit card to lower your credit utilization ratio might sound like a good idea, the act of applying could hurt your credit score.
It’s best to only apply for new loans when you need them. This will help raise your credit score over time.
We hope this article has helped shed more light on what goes into your credit score and how you can raise it. Your credit score affects so much of what you do from getting a loan for a new house to buying a new car. Feel free to save this article and refer back to it for helpful tips when you need it most.
You may also be interested in: How to Improve Your Credit Score
Disclaimer: All investing can potentially be risky. Investing or borrowing can lead into financial losses. All content on Bay Street Blog are solely for educational purposes. All other information are obtained from credible and authoritative references. Bay Street Blog is not responsible for any financial losses from the information provided. When investing or borrowing, always consult with an industry professional.