Credit is important in the financing world, and if you need an auto loan or mortgage loan, having a good credit history can result in easy approvals. Credit scores range between 300 and 850, with good credit being within the 700 and higher range. Consumers who need help with their credit can learn ways to improve their credit score and become a prime applicant for financing.
Get Rid of Credit Card Debt
Paying your credit card and only charging what you can afford to pay off each month can have a tremendous effect on your credit score. Outstanding balances can have a negative influence on scoring, and this one factor makes up 30 percent of FICO credit scores. Someone looking to help their credit score can add several points by simply paying off their credit card balances, or by at least keeping balances below 30 percent of the credit limit.
Paying on Time
Another huge factor in maintaining an excellent credit history is timeliness. Forgetting to pay a creditor or lender, or skipping payments because of financial issues, will hurt your credit rating. Damage to credit hinders mortgage and auto loan applications. You should aim to pay every creditor and lender by the due date listed on the statement. Instead of missing payments, work with creditors to switch your due dates or ask for a payment reduction.
Cleaning up Credit Report
Cleaning up credit reports involves removing negative information in the hopes of improving FICO credit scores. The information reported by creditors and lenders impacts scores. If there's negative information on your file reported in error, correcting these mistakes can greatly improve your personal score. Discovering errors calls for ordering your free report from Annual Credit Report at least once a year. You should thoroughly review each account and check for accuracy. Did creditors report the correct account balance? Did creditors report a lateness in error? Are there unfamiliar accounts on the credit file? Use the available link to dispute any mistakes on your report.
Increasing Credit Account
Too few accounts can also hinder credit improvement. Having a variety of credit accounts helps improve your score because diversifying makes up 10 percent of credit scoring. Having one account or two of the same accounts isn't always enough to improve a credit score. Branch out and apply for new types of accounts. For example, you could add a credit card account if you already have an auto loan or another installment loan; or apply for an installment loan if you already have two credit cards.
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