Your credit score is one of the paramount things in your financial life. Lenders will mostly use this score to determine whether to give you a loan or not. The special figure also determines the interest rate and terms of the funds you are requesting for. People who have a weak credit score are less likely to get loan approvals. If you are fortunate to get a loan with a low credit score, you might be forced to pay higher interest rates compared to the other people with better scores.
How it Works
If you want to have a great score, you have to understand how it works. Your current credit history always reflects your records, especially when it comes to paying realistic loans, your current access to credit and debt levels. There are three recognized credit agencies that collect the information and keep a record of your report. Lenders, insurers, landlords, employers and any other important institution can access the crucial credit report with your permission.
The report released by the credit agency serves as the basis of an individual's credit score. Experts say that this is a snapshot of a consumer's creditworthiness. Most Americans use the FICO score, and it mostly ranges from 850 to 300. An individual is given three scores that are associated with the three special credit agencies. The people who are fortunate to have a credit score of more than 750 are known to be excellent. Those who score less than 650 are believed to have a weak score.
If you want to have a great score, you must maintain an excellent saving culture. Here are more tips to assist you to get the right scores.
Practice Good Personal Financial Habits
If you want to experience a better credit score, you will have to take sixty to ninety days. In some cases, it might take longer. If the situation is serious, consumers have to wait for two to three years for a solid improvement in the score. It is crucial to change all your poor financial habits because this is the best way to reduce the chances of having weak credits in the future. Here are some of the great financial habits:
- Always live within your means.
- Ensure that you have set aside some small cash for your emergency fund
- Save for the future because it is not predictable.
With these habits, it will be difficult to skip any important payments. When you face any financial troubles, you will be in a position to survive and maintain a good credit score. Most people change into good habits when rebuilding their credit score and drop them when things get better. Maintain the behaviours for an excellent history.
Keep All Old Accounts Open
The length of the credit history is an important factor in determining your credit score. This means that keeping your old accounts will work in your favour. It is crucial, to make sure that the number of accounts under your name is manageable. You will be harming your credit score if you decide to close the old accounts.
Keep Your Debt Under Control
The second most important thing in determining your credit score is the total amount you owe. This means that you must keep your borrowing under control so that you do not land in massive debts. If you realize that you have a huge outstanding debt, start working on lowering the balance and stop borrowing.
- Keeping your debts under control is not a walk in the park. This can be achieved by:
- Limiting your borrowing or stopping the habit altogether.
- Stop using credit card when going for shopping
- Making timely payments so that the balance can go down.
Keep Track of Your Score
When you want to see your FICO or your credit score, you will be forced to pay some money. If you get it from a lender, however, you will get it for free. Regardless of how much you will have to pay for this report, it is crucial to get it once a year. When you are aware of your current score, you will work harder to make it better and maintain it at the right levels.
When you have a bad credit score, very many doors will remain unavailable for you. If you want to be in the right direction, work on having a credit that is more than 700. Without a good score, you will experience the following:
- Be forced to settle for bad loan terms that will cost you more
- In some cases, you will not even be qualified to get a loan to expand your business or improve your financial situation.
- Some insurance companies will give you higher insurance premiums just because of your poor credit scores.
- Some modern employers will not hire you for the position you applied because they like check the credit scores of their potential employees.
Make Payments on Time
One of the important things is maintaining a great credit is making sure that all your payments are done in the correct time. Most financial institutions will consider the payment history when they want to determine your credit score. If you make any payment past thirty days or more, it will be shown on your credit report, and it will have a bad impact on the score. The negative mark stays on the credit report for seven years, and they have bad effects on your financial status.
Everyone wants to have a great credit score. With patience and hard work, it is possible to maintain the excellent score you have been dreaming about.
Rebuilding Your Credit Score Requires Patience
When you have followed the tips explained above, you can be assured of getting a credit score of over seven hundred. Patience, however, is paramount in the process. In most cases, credit improvement will not happen overnight. Everything will depend on the current status of your credit. As stated above, you might take years to get the excellent credit. When you are patient and keep the right habits, most lenders will reward you with better rates. The interest in your savings will help you a lot too.
*This is a collaborative post.