February 3, 2020

5 Tips to Rapidly Improve Your Credit Score

5 Tips to Rapidly Improve Your Credit Score

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No matter if you are just starting your mortgage journey or you already have some experience with loans, you have to know that your credit score information directly influences your mortgage history. In fact, your credit score determines your ability to get a mortgage and the potential of being approved for a loan. In other words, this means that if you are approved for a loan with a good credit score, the interest rate for your loan will be significantly less than someone with poor credit.

Taking into account the importance of a good credit score and the difficulties associated with it, we have prepared a guide on how to improve your credit score in a short time. Let’s have a look at it.

Tip #1: Pay Your Bills on Time

Obviously, one of the most effective ways to improve your credit score is by making your payments on time. In fact, when determining your credit score, a major importance is given to the history of your payments. More precisely, it accounts for 35 percent. 

If you are having difficulty remembering the due dates of your payments, it will be beneficial to set up certain reminders, or even use some digital apps for help. Take into account that even if only by a few days, delinquent payment highly affects your credit score negatively. 

Tip #2: Keep Your Credit Card Balances Low

Through your credit history, you can demonstrate that you’re actively reducing your balances, while responsibly and effectively utilizing your credit card. Depending on your personal situation, paying more than you owe each month on your current debt balance can benefit you in multiple ways. Helping you to pay off your debt faster and reducing your overall debt load are just a few to mention. 

We would also recommend you to spread your credit card debt over three or four cards, while simultaneously keeping the balance on each one of them below 35 percent, as opposed to maximizing it on one card. In this case, if you have more than one loan, you can make more significant payments on one account and continue to make at least the minimum or a little more payment on the other balances. This will help you to reduce the balances at one time. 

Once you have fully paid off one balance, you can dedicate more time and effort to fully paying all of your debts.

Tip #3: Reduce Your Debt-to-Income Ratio

To put it shortly, your DTI ratio is your monthly debt payments divided by your gross monthly income. It is one of the primary ways that allows lenders to measure and ensure your ability to appropriately manage your monthly income. 

Let’s take an example. If you have a low debt-to-income ratio, it can serve as good proof for creditors and lenders that you have a good balance between the amount of debt that you carry and the amount of income that you earn.

On the other hand, a higher debt-to-income ratio puts you in a higher lending risk, as it means that you have more debt than you can support through your income.

Tip #4: Remove Any Incorrect Information on Your Credit Report

One of the best steps in boosting your credit score is constantly checking and assuring the accurate and up to date information on your credit score. There are various ways to get your credit score reports for review. Those also include online services that offer identity theft protection and credit monitoring. One of the essentials in obtaining your credit report is being careful, as there is a risk of being lured into paying for services that you don’t necessarily want or need. 

When you receive your credit report, first read it thoroughly to make sure that all of the details are presented correctly. In case you find any incorrect information on your credit score try to report it to the credit bureau as soon as possible so that they can remove it with appropriate time manners. Otherwise, it will continue to damage your credit score and reduce your chances of gaining future credits.

Tip #5: Keep Your Credit Cards, Even If You Are Not Currently Using Them

It’s worth taking into account that another important factor that highly impacts your credit score is the length of time you had the established credit. Did you know that you are getting rewarded for having a long-term positive history with each creator, even when you are already inactive with your account? As a result, the longer your positive credit history is with each creditor, the better.

Keep this in mind and avoid closing old accounts. Moreover, if you have multiple credit cards that you don’t use, instead of closing them simply keep the credit cards in a safe place. Likewise, having a five-year car loan and showing four or five years of positive payment history will definitely increase your chances of getting a good deal for a loan.