Are you worried about your credit score? It isn’t where it is supposed to be? Then do not worry, with the right credit counselling, you can go for a credit repair, and watch your score skyrocket in no time.
Here are typo five ways you can adopt to improve your credit score fast at the least interest rates even on the loans and your credit card.
1. Be prompt and regular in paying all your bills
The best and the fastest way to increase your credit score is by becoming regular in paying all your bills and payments. The payment history of an individual plays a crucial role in determining the credit score. In fact, credit bureaus take into account the payment history while reviewing the credit reports.
Your payment history contributes 35% of your credit score. Even if your payments are late by a week or a few days, it will take a toll on your credit score. Set reminders, tell someone in your home to remind you, put alarms in your phone, do whatever it takes to stay on track about your payments.
You can jot down the due payment dates on your regular paper calendar or mark them on your phone. Make sure the approach you take keeps you updated on when your payments are due in the month. This is a great tip that will help you make timely payments.
2. Try paying a little more than the minimum amount
Another great tip for improving your credit score is to make more payments than what is due. It has great advantages. Firstly, it helps you take off your debt load, and secondly, you pay all the balances much more quickly.
In case you are using multiple different credit cards, you can make heavier payments on one and go with paying at least the minimum on the other so you can stay focused on your balances and reduce your load.
When you have paid off the balance on one, you can move onto the next, and one by one get done with all your due balances.
3. Take steps to pay your debt, don’t skip it
Another crucial factor that determines your credit score is the balance that you owe your lender relative to the available balance in your credit. The available credit in your account is termed an open credit utilization rate.
In an ideal situation, you should not be near or at the end of your credit card limit. There is another term called utilization that shows the amount of credit you are currently using. This is the percentage available to you on your credit card and the percentage of your overall credit.
4. Watch out for your debt-to-income ratio
The debt-to-income ratio, also known as DTI, is a unit of measure for personal finances that puts your personal finances in comparison to your income. This is a great way for your lenders and lending companies to see how you manage your monthly finances and how you pay your debt or installments.
DTI is calculated by dividing your total debt such as your car loan, study loan, or mortgage by your overall income. In case your DTI is low, then the creditors and lenders will know that you have a fair balance in the amount that you have to pay as debt as compared to the amount that you earn in a month.
However, if you have a DTI rate that is high then this shows your creditors and lenders that you have a larger amount of debt than your monthly income. You are seen as a risky candidate for loan or credit approval. This is not a good sign to have on your application; a higher DTI.
5. Have multiple types of debt
It is ideal to have a mixture of various types of debts on your credit report rather than only having one type of debt. This has multiple benefits in the long run. You can apply and get various kinds of debts or credits approved such as:
- The bank credit cards
- The mortgage loan
- The loans on installments such as study or car loan
- Gas station credit card loans
According to a study by FICO, an applicant should have a mixture of different sorts of credits and loans on their credit report to appear as a less risky candidate. Let’s say you have $100,000 as your debt on your account, it is better if this amount is divided into various loans rather than just one unpaid debt such as a mortgage or car.
All of the different types of debit or credit you have on your credit report will contribute at least 105 in determining your credit score. Make sure you do everything possible to increase your credit score so that you become eligible for better loans.
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