Most people are not even aware that there is such a thing as a credit score until it causes them problems when applying for some type of credit facilities. It is also not an exaggeration to say that most people who do have loans like mortgages or personal loan may not even be aware that such thing as credit scoring exists.
Some people might be outraged that their personal information are shared by lenders as a way to judge how credit-worthy they are. But if you think about it in a logical way, it does make sense. No lender is obligated to loan any amount of money to anyone or any company. And how can they judge whether a new customer will be a good customer unless they can take a look at how they are managing their current and past finances. Would you lend money to a stranger if you knew that has not repaid someone else on a loan?
If you already know how important your credit record is when you are applying for things like mortgages, you will probably be looking at ways to improve it especially if you have a feeling that your record is not as good as you would like it to be. Here are 6 simple steps you can take to improve your score.
Obtain all your credit reports from the different credit agencies
You want to do this so that you can tally up your records and look out for mismatches and deficiencies. Different lenders might obtain them from different agencies. This is why you want your report to be accurate one each agency’s database. Look out for mistakes so that you can get it rectified before applying for a major loan. Data entries are many by people, and humans can make mistakes. It will be up to you to ensure that there are no mistakes in your report.
Get adverse information legitimately removed
You don’t want potential lender to see your late payments made several years ago. If those records are more than 7 years ago, you can make a request to have them removed. If you have previously been a bankrupt, you will know that lenders will run the moment they hear that word. If your bankruptcy was more than 10 years ago, request for that entry to be removed.
Make timely payments on credit card bills and loans
The most basic of advice to build a good credit score is to make sure you pay your bills on time. Doing so helps you avoid going deeper into debt and will showcase you as a model borrower as well. If you have shown that you are a responsible and timely borrower, there is little reason for a lender to refuse a loan to you.
Keep long relationships
The longer your relationship is with any bank, the better you will look. If you keep opening and closing accounts, you give the impression that you are gaming the system. So don’t close accounts for no reason. Saying that, if it will cost you extra money just to hold onto a facility, make the practical decision to switch to a better facility.
Limit your accounts
The more loans and credit cards you hold, the bigger your chances to impress potential lenders. On the other hand, it also puts you in a position where you can easily overspend and get deep into a debt spiral. You can easily avoid this problem by setting a limit to your credit lines and debt accounts. You might also want to cancel facilities that you are not using too.
Remember that boosting your own credit is not about gaming the system. It is about staying in the line of the rules stipulated in the system. Since borrowers are going to use such a thing as credit scoring to ascertain your risk profile, you have the right to manage your own profile. It is in your own hands to create an attractive credit score which lenders will like.