Ways of Improving Your Credit Score

5 Effective Ways of Improving Your Credit Score

There are a number of things you are unconsciously doing right now that may be pushing down your credit score. You will be negatively affected by a bad credit score (which means you might need the help of a top credit repair company in the future). You may not get the interest rate you want. Credit may also be unavailable to you. A survey done in 2014 by a financial services company revealed that consumers are mostly in the dark concerning the actions which may or may not help to increase their credit scores.

If you want to know how to improve credit score, you should first decipher the basics. The credit score as calculated by FICO is among the most popular ones when it comes to lending decisions. The score range starts from 300 and goes up to 850. A FICO score is considered excellent when it is between 750 and 850. If you have scores within that range, you will get access to best loan terms and the lowest rates.

A good credit score is considered to be between 700 and 749. If you fall into this range, all loans will be approved, but at slightly higher interest rates. The range between 650 and 699 is regarded as fair and people falling into this range could be turned away for loans or may have to pay steeper rates.

Equifax, TransUnion and Experian – the three major credit bureaus have created VantageScore. It has a credit score range between 501 and 990. The VantageScore 3.0 mimics the FICO range between 300 and 850. It should be noted that, independent of the name, scores could vary among credit bureaus. It is due to the fact that the numbers depend on the calculation of the scores and the particular method used for calculation. Every credit bureau follows its own formula.

Five habits to go by

If you have a bad credit score, it is possible to begin to take right steps to improve it. You can adopt the following five habits to achieve a good credit score:

Always pay on time

Your payment history is the most important factor when it comes to credit scoring. Payments which are 30 days late or more could quickly pull down your credit score. In fact, your score will be hurt if you make even one payment late. It is seen that 96 percent of consumers having a credit score of 800 make timely credit payments. You should pay on time even if you pay the minimum amount. It is because the time factor is more important than the amount. Set up an automatic bill pay via your bank account so you do not miss the payment.

Minimize available credit use

It is another important factor when it comes to assessing your credit score. It shows your debt compared to your available credit. It is discovered that individuals with 800 or more credit rating use a measly seven percent of their available credit.

Maintain nil or minimal balances

Individuals enjoying excellent credit always maintain low balance on credit cards. They also do not pay any interest as their balance is paid in full every month. To keep it short, use cards only for the things you cannot pay with cash.

Have a long credit history

People with 800 or higher credit score have a median account history of approximately 11 years. In contrast, the average account history is seven years for individuals having a 650 score. Opening new accounts simultaneously can hurt your credit history.

Apply for credit only when you need it

It is vital that you have a healthy and judicious mix of credit, including mortgages, personal loans, credit cards and auto loans. However, you should not apply for every credit line. Multiple inquiries by lenders pull down credit scores.

It is good to adopt a conservative financial approach if you want a good credit score. There is no point in spending more than what you can repay. Even if you take credit from multiple sources, you should always pay your installments on or before the due date.

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