A person’s credit score is a number used by lenders to determine what the chances are you will pay them back on time if they grant you a loan or a credit card. It is a very important financial factor. If you have a higher credit score, you will have a higher chance of qualifying for credit cards and loans at more beneficial terms thus saving you money. There are many people with a less than favorable credit history but the good news is that if you address it early enough, then your credit scores are bound to go up soon enough. A credit score is a reflection of your credit payments over a specific period while still emphasizing on your recent credit information. You can restore your credit by taking certain measures as described below so your credit score is up there in no time.
Paying Your Bills Punctually
When lenders are evaluating your credit report and they ask for your credit score, they are most interested in knowing whether they can depend on you to pay your bills on time. This is because your payment performance in the past is often seen as an effective indicator of how well you will pay in the future. You can make a good impression on your credit score by making sure you pay all your monthly bills on time as agreed. If you frequently settle accounts for less than the agreed payment amount i.e. student loans or auto loans or if you always pay late, this can have a bad effect on your credit scores. Therefore, it is a good idea to pay all your bills in a timely manner, which includes loans, credit card bills, phone bills, utilities, rent, and the likes. Take advantage of tools such as calendar reminders and automatic payments to remind you to pay on time come month-end.
On that note, if you are late on any payments, ensure you update them as soon as you can because missed or late payments can put a negative mark on your credit report for a very long time. They can lower your credit score over time especially more recent late payments.
Keep Your Credit Card Balances Low and Pay off Debt
Another crucial number to keep track of when calculating your credit score is the credit utilization ratio. It is usually calculated by adding all of one’s credit card balances and dividing this amount by his or her total credit limit. To determine one’s credit utilization ratio, you need to examine all credit card statements from the most recent 12 months add the monthly statement balances across all cards and divide the figure by 12. The final figure is the average amount of credit used every month. Lenders usually find low ratios of at most 30% appealing as people with high credit scores tend to have low credit utilization ratios. You can reduce your credit utilization ratio by keeping your credit card balances low and paying off your debts.
Reviewing Your Credit Report
You are usually granted one free annual credit report from any of the three credit reporting bureaus namely Experian, Equifax, and Transunion. Requesting a credit report does not affect your credit score so you should review it as closely as possible to dispute any indicated errors. This is as good as a quick credit fix and letting the credit reporting agency know about any outdated or wrong information can boost your credit score once the incorrect information is rectified.
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