Having a good or an excellent credit score is important. This would play a role on your future loans. Whether you’re trying to borrow cash or you’re getting a new house or car, your credit score will be checked by the lending companies. A bad score could make the interest rate higher or worse, it could affect the chance of having your loan approved. Furthermore, a lot of employers also check on credit scores nowadays. This is used as a factor in deciding whether to hire an applicant or promote an employee. So what is an excellent credit score? Credit scores usually range from 300 to 850. Many people think that 600 is an excellent score, which is incorrect. This is not even good enough. Credit scores that are 720 and higher are considered excellent, 680 to 719 are good, 620 to 679 are average, 580 to 619 are poor, 500 to 579 are bad and anything below that is miserable. You want to achieve an excellent credit score as this will give you the best rate on your future credits. Even if you have bad ratings on your credit history, there are still things that you can do to improve your score.
10. Request for Adjustment
If you’ve been paying well for the past years and you recently had late payments, you can ask the creditor for a good will adjustment. Most lending companies would agree to remove one or two late payments on your account, which could improve your credit score. Lenders will not openly offer this to you. But if you take the chance to ask for the adjustment, then you might be saving yourself from that unwanted score.
9. Avoid Co-Signing Loans
Whether it is with your best friend or a relative, avoid co-signing loans if you’re not the one who needs it. You will be putting your name and credit score at risk if you do this. In case your co-signee failed to continue paying for the loan, the responsibility will be transferred to you. If you do not pay for money owed, your own credit score will suffer.
8. Avoid Multiple Loans at the Same Time
Applying for multiple loans at once will also affect your credit history. Creditors will check on your credit history and several inquiries within 30 days can pull down your credit score. Furthermore, lenders would think that you are badly in need of money and they may question your ability to pay for the loans.
7. Create Reminders for Payments
Sometimes, you have the money to pay for the amount you owe but the problem is that you forget to make the payment. This is possible especially if you are busy with work and you have several bills to pay that have different billing dates. Take note of all the bills you need to pay and their due date. If you can afford to pay other fees in advance so you don’t forget about them then do so. There are several ways on how to create your reminders. You may manually write them down in an organizer or even a regular note, set them up on your phone or via online application if you regularly check your e-mail. Most of these applications are free so you can take advantage of them.
6. Make Automatic Payments
You can make automatic payments for recurring bills like electricity or phone bills straight from your bank account. Through this, you can prevent late payments and avoid affecting your credit score. You may also allow automatic payment for your credit card balance. You can set the payment to the minimum amount that you need to pay each month if you think you can’t pay for the whole balance. In case you have extra cash, you can always pay the remaining balance manually.
5. Do Not Close Old Credit Cards
If you have several credit cards and you wish to close the other accounts since you only use one or two of them, there is no need to do this, especially if they have good credit scores. Closing credit accounts may affect your credit record, as lenders would think that they may not be able to keep you as a customer for a long time. Furthermore, credit bureaus also check on the length of years that you have been using your accounts. Doing business with these companies for a long time would give a positive effect on your credit history. Keep your credit cards somewhere safe if you don’t want to use them instead of closing them.
4. Keep Your Credit Balance Low
Maximizing your credit limit will give a negative effect on your ratings. The average credit balance that you should maintain to prevent getting a low score is 35% of you credit limit or lower. If you go over this, try to pay the balance as soon as you can to keep it under control.
3. Pay Your Past Balances
Unpaid credits will stay in your credit history for years. Straighten out your past balances so they will be removed from your report. This will also improve your status with the lending company.
2. Pay Your Bills on Time
Paying your bills on time is one of the most obvious things to do to avoid getting a bad score. However, its importance needs to be reiterated as a lot of people still forget to do so. As mentioned, reminders or automatic payment can be setup to avoid delays.
1. Review Your Credit Report
Not everything written on your credit report is accurate. Sometimes, companies do not have updated records resulting to errors on their reports. Some of the most common mistakes that these companies have include adding credit that you do not owe and including a credit that you already paid. There are three major credit bureaus that create credit reports. They are Equifax, Experian and TransUnion. They provide free credit report per year. Take advantage of this so you can review your credit history without spending anything. If you see any errors on your report, contact the credit bureau that prepared it and file for dispute. They will contact the company involved and request that they provide proof of the bad credit report. If no proof was presented or the company did not respond within a specific period, the bad score will be removed from your history.