How to improve Credit Score?

Credit scores are important, you know it. If you have over 720 on a scale of 300-850, then you are qualified enough to apply for any kind of personal loans – unsecured as well as secured – at leading banks and lenders. You know how beneficial it could be to avail a SunTrust’s backed LightStream Unsecured AnythingLoan or a Citibank personal loan as your rate or interest can be well within 10%.

What if you have less than 700? You can still qualify for most personal financing options, although at a bit higher interest rate, provided you do not fall below 620 on FICO Score. Anything below 600 will pose an increasingly difficult scenario for you to qualify or an unsecured personal loan. You may still qualify for a secured loan if you have something of value to put as collateral.

Won’t it be a good idea to improve upon your credit score and avoid all the hassles of searching for a reliable bad credit lender? You will save a good sum in interests and fees with a normal personal loan option at a major bank. It’s high time you should consider and decide to behave responsibly in all your financial matters. Here is a step-by-step approach to help you improve credit score in a few months.

1. Get a Copy of your Credit Report: The first step would obviously be to know about your current credit standing. The credit reporting agencies – Equifax, Experian and TransUnion – are required by law to law to give you one free copy of your report per year. It is a good idea to obtain one credit report every four months from these reporting bureaus. You can do so at the website of AnnualCreditReport.com.
2. Check whether your Report is Correct: More than half of the reports issued by these agencies are said to contain some sorts of errors. You have to double check to make sure that your copy of credit report doesn’t contain such errors. If it does, then you need to get it rectified soon to have a correct picture of your credit standing.
3. Understand your Credit Score: It is important to understand what make up your credit score. Delving deeper into the calculation process of FICO Score will reveal that there are a couple of things that might have made worked negatively for you. For example, it could be late payments, high credit utilization, insufficient credit history, too many applications for new credit or not much variety in the types of credit you have.
4. Confess: Often it is your past that casts a shadow on your present credit standing. You can’t deny the fact that you behaved irresponsibly in certain financial matters. Okay it is not you but the circumstances that forced you to miss a couple of payments, spend more than desirable from your credit line, or default on your mortgage or other financial obligations. Now it is time to discover such mistakes and put all your effort to correct the same.
5. Be a Debt-free Person: Plan how you can pay any existing debt. The sooner you get rid of it, the better it would be for your credit score. Negotiate with your lender and offer to pay up your debt in full in lieu of a written agreement that your debt will be marked as paid, and if possible, removed altogether from the credit report. If you have consistently been making your payments on time before the financial hardship, you are likely to be considered favorably by the lender.
6. Don’t overuse your Credit Limit: About 30% of your credit score reflects how you have utilized your credit limit. First, you need to check the actual limit of your credit card. Then make it a point not to use more than 20 percent of that limit. Going beyond that limit will have a negative impact on your score. If you need to spend more, you can request an increase in the credit limit. The same applies on a personal line of credit.
7. Make Payments on Time: Needless to say this is the most important step you should take to improve your credit score. Don’t forget to pay your bills, mortgages and loans before they are due. If you can’t keep a track of things, then you can benefit by automating your payments. Sometimes, auto payments can bring extra benefits also for you.
8. Stop Applying for New Credit: Every time you apply for a loan or credit card, your credit report is accessed, which, in turn, can weaken your credit standing. All inquiries about your financial soundness are mentioned in your credit report, contributing to 10% or your credit score.
9. Keep Open any Existing Credit Card Account: The history of your credit is an important component of your credit score. If you have existing credit card or other accounts, then it is only a sensible thing to keep them open and actually use them. Make a little purchase each month and make your payments on time. You will soon get to see your credit score improving.