When searching for the perfect home or the perfect car, one of the first things that any lending agency will want to look at is your credit score. For those individuals with less than perfect credit because of life’s events, then this can be a hard moment. Your credit score won’t show that you got laid off from your job or that you had a terrible accident that left you with massive medical debts, it will only show numbers. This number will follow you your whole life, so you will want to improve it as fast as possible.There are ways to quickly improve your credit score so that those purchases become a little easier for those with lower FICO scores.
Dispute Your Credit Score
Due to the mass amounts of data that they have to work with and other reasons, sometimes credit card companies and other financial institutions make errors on your credit report. When this occurs, you should dispute your credit score. This happens to more people than you think, and there is actually a very easy way to fix it.
If you think you are one of the thousands of people this happens to each year, send proof of the error to the three major credit bureaus, who will check and make sure it is a legitimate error with your other financial institutions. Within a few weeks, when everything has been processed your score will begin to improve, as long as you were correct.
Of course, in order to know whether or not your low credit score is the result of an error, you have to make a soft inquiry about your credit score and check it for yourself. Contrary to popular belief, such soft inquiries as you checking your own credit score will not negatively impact your score at all. Only hard inquiries made by lending agencies that are considering you for a loan, will actually affect your score.
Pay Down Your Debts
Put simply, credit scores are based on how risky you are to lend money to. Because of this idea, you want to try to minimize the amount of risk that you pose to a lender. One way that you can prove that you are not a major lending risk is by paying off your debts in a timely manner.
Debts show that you have spent or borrowed money that you did not have, and have yet to pay back. The longer this stands on your financial history, the more risky you look to potential lenders. Lenders don’t want to be added to a long list of other lenders. They want to know that you will be able to pay them. If they see that you have lower debt you will look less risky to them because you haven’t over extended yourself.
Your financial history makes up thirty five percent of the reason that you get the credit score that you do, so make sure that it has as few negative things to report as possible.
Furthermore, keep your balance, even on positive accounts below 20%. This shows that you are responsible with money. This shows that you aren’t maxed out. Lenders like to see that you leave wiggle room.
So, find a way to pay down your debts, whether that means taking out a personal loan, getting a side job, or finding a new way to pay the debts (multiple payments every month, etc.).
Pay Your Bills On Time
Another way that you show potential lenders that you are not a risk to lend money to is being punctual about paying your bills. When you do this, it shows financial institutions that you have your finances in mind and set enough money aside every payment cycle to take care of the necessities.
It is understandable if life happens and you are late one or two days, but never be 30 days late. That is noted on your credit file, not to mention you will get late fees and interest added.
If you struggle to pay your bills, break down payments so that instead of one large payment at the end of a payment cycle, you can pay multiple, smaller amounts until the bill is paid. This is not something you want to continue over years. The smaller payments is an option to continue short-term while you are getting on your feet.
Do Not Apply for New Credit
If your credit is not where you want it to be, then you should wait until your score improves before you try to apply for new credit. One of the reasons this hurts your credit score is because fifteen percent of the reason that you receive the credit score that you do has to do with the age of your accounts. The older the accounts, the better it looks. Thus, when you add a brand new trade line to your name, you lower the average age of your accounts and your credit score with it.
Not only that, but if you choose to open a new line of credit, this is where the hard inquiries from earlier come in. Every time you open one, there must be a hard inquiry, and that will bring down your credit score even more. Only apply for new credit when you absolutely have to, otherwise you will lower your score. Try to limit hard inquiries to only a couple every year.
These four tips will help you be on the way to better credit and a solid financial future. With a stronger credit score, you will no longer have to worry about unforeseen financial setbacks and higher interest rates or even the dreaded denial.