More About Boosting Your Credit Score

A followup to a previous article How To Improve Your Credit Score

Having a good credit score is one of the most crucial fundamentals for acquiring financial stability. This is because your credit score does have a hand in just about everything touching on your finances, from getting your credit card, financing your mortgage, finding insurance cover and even finding a job. As you already know, money makes the world go around. It would be great if love did; however, without money, national and personal economies would collapse and anarchy would reign high. This is why you need to figure out how to boost credit score in case yours is in a bad shape.

So, what is a credit score and why should you have a good one?
This is a three digit number that is generated using the information currently present on your credit report. It is meant to predict the risk, particularly, the likelihood that you will default on your credit obligations. Your credit score can be as low as 300 and as high as 850. Basically, a score of 850 means that you are trustworthy and less risky to lend money to while a score of 300 on the other hand means that you are a very high risk borrower. These are made based on the data contained in the free credit reports from all 3 bureaus reports.

Your FICO is composed of five major categories. Here is how your FICO score is determined.
•    35% of your score is determined by your payment history, including all defaults and public records.
•    30% is based on your current debts
•    15% is based on the length of your credit history including how long you have operated your accounts.
•    10% is based on the types of credits you have used such as revolving and installment credits
•    10% is based on the new credit such as credit enquiries and the number of recently opened accounts.

So why do you need a good credit score?
Your credit score can mean all the difference between being approved or declined for credit as well as the interest rate at which you will repay your loan. First off, an impressive credit score can help you qualify for your apartment rental and even get your utilities connected without making the initial deposit.

Your credit score is the major yardstick that your financiers will use to determine whether you are credit worthy or not. Thus, the decision regarding your loan will totally depend on your current credit rating. If your credit rating is high, then chances are you will qualify for the loan. Better still, you can easily get your loan at a lower interest rate. Thanks to a high credit score, you can negotiate better rates on your loans and credit cards. It all revolves around trustworthiness. Thus, with a good rating, you can have a better leverage for negotiating your interest rates.

Finally, potential employers love hiring people with good credit scores. This is because your credit score is a direct reflection of your level of financial organization and discipline.

So, how do you boost your credit score fast?
Building and maintaining a good credit score is an unending process. Thus, the best way to achieve a good credit score is to remain financially organized and learn how to manage your debts wisely. However, if your credit score is damaged, then you need to figure out how to boost your score fast in order to qualify for credit. Here are five simple steps that can help you boost credit score fast.

1. Get your credit report and credit score
You can obtain your free credit report gov from each of the three credit bureaus once an year: Experian, TransUnion and Equifax. Be sure to get all the three reports because they may have a slight variation.

2. Reduce Your Debt vs Credit Ratio
This could be one of the fastest ways to help boost your score according to many experts. Paying off large credit card balances relative to your credit limit. Keeping the debt balances low in relation to your credit limit. They say below 30% of your credit limit is a good figure to maintain. people who have lowered their debt balance have often seen significant boost in their credit score.

3. Do Not Close Old Accounts.
Old accounts are actually a positive thing for your credit. It shows you have a good credit history. When people close their old accounts, they sometimes experience a significant lowering of their score.

4. Carefully examine your reports for errors and inaccurate information
Once you have received your credit reports, you need to look out for all the items entered on them. Surveys show that 25-50 percent of credit reports come with errors and inaccurate entries. These errors may appear on your report when the bureaus mistake you for someone else with the same name as you. The other reason, which can be more serious, is identity theft.

5. Establish the source of errors appearing on your report
Once you have spotted the errors appearing on your report, you need to establish the origin of these errors. Start off by verifying your identity to ensure that your names and address and social security number are correctly appearing on your report.

Upon spotting the errors on your report, be sure to contact the credit bureaus in order to have the errors corrected. In case you are a victim of identity theft, ensure that you contact the police, your creditors and the credit bureaus alerting them of the fraud.

6. Dispute the errors on your report
Apart from errors in your personal information, your credit report may also come with errors in the form of late payments that you actually made on time, closed accounts that are still listed as open and outstanding debts that you have already paid. All these errors can have a negative impact on your credit score hence you need to ensure that you dispute them until they are erased from your report.

7. Manage your debts well
This goes right back #1 and to the rest. Once you have improved your score, ensure that you uphold this status by managing your debts well. And with the items responsible for your poor credit score off your report, you need to develop the discipline of paying your debts on time and keeping the debt ratio low.

The importance of a good credit score cannot be overstated. If you are planning to apply for credit, then you need to ensure that your score is in order. However, if your credit score has been tainted for any reason, then you need to figure out how to boost credit score fast before approaching your lenders.

How To Improve Your Credit Score

Regardless of whether you’re rich, poor, etc, most lenders and financial institutions will check your credit score before offering you a loan. In order to get approval for a  personal loan, mortgage, or even a payday loan, the lender will examine your  credit history and credit score. A better score also gets you better loan interest rates for such things as auto loans and mortgage loans. That is why it is recommended that you take steps to improve your credit score. Improving your credit score doesn’t happen overnight. It does take some time to accomplish this.

There are at least 6 things you can focus on to improve your credit score:

1. Payment History – You should try to pay your bills on time. You should not opt for late payment options which can bring your credit score down. You can also immediately contact your creditors whenever you get in a bind and can’t make your payments on time. Creditors tend to be pretty lenient and will work with you to set up some sort of payment plan and won’t always report your late payment to the credit bureaus. But you have to do this early on. You shouldn’t wait until you’re already delinquent in your payments. This will help you keep your credit reports clean and your credit score high. If you ever do get into a financial situation where you cannot make your payments – even after you’ve set up a payment arrangement with your creditors – you may need to discuss your situation with a nonprofit and legitimate credit counseling service. These services will then negotiate a payment plan with your creditors.

2. Debt-to-Credit Limit Ratio – You should try to keep your debt-to-credit-limit ratio  low. The magic number seems to be around 30% and less. Try not to go higher than 30%. Most experts also recommend that in order to improve your credit score, you should not close your unused accounts even if the balance is zero. Low balance as well as showing that you have some credit history will work towards your advantage when your credit score is calculated.

3. Management of New Credit – Don’t go crazy trying to get new credit. Don’t respnd to every credit card offer you get in the mail. Sounds obvious, but if you don’t need it, then don’t apply for it. This will raise a red flag with potential creditors. If you are interested in obtaining several credit cards, then do it over a good span of time.

4. Credit History – We touched on this earlier. If your credit history is less than 3 years, you should be careful about opening new credit accounts in a short span of time.

5. A Varied Credit Profile – If improving your credit score is your goal, then a varied credit profile often helps. If possible, a variety of debt instruments such as installment loans, credit cards, and fixed payment loans instead of just credit card debt looks better.

6. Fix or Dispute Credit Errors – By correcting any errors on your credit files, this will also help improve your score. To get the details of your credit files from all 3 bureaus, you can obtain your free credit report once an year from the government. For more frequent access, you might try a credit monitoring service and get a free trial, or order your reports directly via the 3 credit bureaus.

These are just a few things briefly mentioned to help improve your score.