Your credit score is the statistical representation of your past credit behavior. According to the makers of the FICO credit score, Fair Isaac Corp, your credit score is divided into five different categories: Type of credit used, payment history, new credit, length of credit history, and amount owed. Every category entails a wide range of factors that have an effect on your overall score.
One of the fastest ways to increase your credit score is to concurrently improve in all categories. Improving your credit score might take anywhere from a few months to a few years. However, it may take significantly longer to improve your credit score if you miss or skip payments. Here is the easy way to learn how to check your credit score.
1. Keep an eye out for credit card balances
One of the main factors that can affect your credit score is the ratio of revolving credit you have to the amount you are actually using. In other words, you will have a better credit rating if that ratio or percentage is smaller. The recommended percentage for a good credit score is 30% or less. Paying down your balances and ensuring they remain low will boost your credit score.
Paying your balances monthly in full will help you get an increased utilization ratio than you expect. This is because most issuers use the balance statement on the bureau’s records. Your monthly balances will still be weighed down by your credit score if your balances are being paid in full each month.
To deal with this issue effectively, find out if the issuer of your credit card can accept multiple payments spread throughout the month. One of the most effective ways of improving your credit score is by clearing balances. These include small balances that you have on your credit cards.
Use one card to pay for your services instead of different cards. Being charged $50 on one card and an additional $30 on another can badly affect your credit score. The card you use should be the one with the lowest interest rate.
Improve your credit score by gathering all your credit cards with small balances and clearing them off. Choose one or two cards which you can use for making payments. This strategy will help ensure that you do not fill your credit report with numerous and irrelevant balances. In addition, buy seasoned tradelines to help increase your credit score.
2. Know the difference between good and bad debts
Many people think that having old debts on their credit reports is a bad thing. Some will do anything to get their old debt removed from their credit reports. Your credit score will be affected by negative items on it. However, some of the negative items will automatically fade away from your credit report after 7 years. Remember, it is a bad idea to scrap off old accounts off your report just because they have been paid off. Good debt is good for your credit report.
Good debts refer to debts that you have paid as agreed or handled well. You will have a better credit score if you have a history of good debts in your credit report. Improve your credit score by leaving good accounts and old debt on your report for as long as possible. This is important because some of your old accounts may have a solid and good repayment record. Removing old good debt from your credit report is more like getting good scores in high school and trying to erase the record in future.
3. Use your calendar
It is important to do your rate shopping within a short time if you are looking for a student loan or shopping for a car or home. You can experience a small drop in your credit score every time you apply for credit. The drop usually lasts a year. Multiple applications for credit means that the applicant wants to use more credit. FICO score, which is the credit score used by most lenders, does not validate any inquiries made 30 days before scoring.
Any inquiries older than 30 days will be counted as those made within the normal shopping period. They will also be viewed as just one inquiry. The credit score you use will determine the duration of that particular shopping period. Lenders who use the latest forms of scoring software will give you 45 days. You will have to keep it to 14 days for lenders who use older forms of scoring applications.
It doesn’t matter how close together you make your applications because older forms of the software will not count several student loan inquiries as one. Therefore, make your applications within a short time and avoid dilly dallying.
4. Make timely payments
Anyone who wants to make a major purchase like a car or a home should consider saving and making significant down payments. Some may take loans to achieve their dreams. However, it is important to juggle the bills and avoid late payments. Remember, even a small drop in your credit score can make it difficult for you to obtain financing for your dream car or home.
One of the best ways to maintain a good credit score is by making timely monthly payments. What appears on your credit report is the major determinant of your credit score. You will damage your credit score if you delay or default in making payments. One of the best ways to improve your credit rating is by saving for major purchases and making large down payments for those purchases. In addition, clear you debts on time.
5. Maintain your good credit score
Once you have cleared your debt and achieved a higher credit score, protect it by paying all your bills on time. Missed or late payments will definitely affect your credit score. Ensure that the credit you use is less than 30% of your current credit. Avoid anything that might sink your credit score such as missing payments, paying less than required or taking cash advances. Finally, check your credit report regularly for any signs of fraud.
Your credit score is determined by several factors including payment history, amount owed, average age of credit accounts, number of inquiries, and the types of credit you use. Although it may take a while for you to improve your credit score, there are several strategies that can help boost credit score quickly.