Because of the way credit scores are calculated, some actions you take will affect your credit score better than others. In general, paying your bills on time and meeting your financial responsibilities will boost your score the most. Owing a reasonable amount of money and being able to repay it will show lenders that you take your finances seriously and pose little threat of lost money. There are a few tips that, more than any other, will boost your credit score the most:
Pay your bills on time.
One of the best ways to improve your credit score is simply to pay your bills on time. This is absurdly simple but it works very well, because nothing shows lenders that you take debts seriously as much as a history of paying promptly. Every lender wants to be paid in full and on time.
If you pay all your bills on time then the odds are good that you will make the payments on a new debt on time, too, and that is certainly something every lender wants to see. Experts think that up to 35% of your credit score is based on your paying of bills on time, so this simple step is one of the easiest ways to boost your credit score.
Paying your bills on time also ensures that you don't get hit with late fees and other financial penalties that make paying your bills off harder. Paying your bills in a timely way makes it easier to keep making payments on time.
Of course, if you have had problems making your payments on time in the past, your current credit score will reflect this. It will take a number of months of repaying your bills on time to improve your credit score again, but the effort will be well worth it when your credit risk rating rebounds!
Avoid excessive credit.
If you have many lines of credit or several huge debts, you make a worse credit risk because you are close to ?overextending your credit.? This simply means that you may be taking on more credit than you can comfortably pay off. Even if you are making payments regularly now on existing bills, lenders know that you will have a harder time paying off your bills if your debt load grows too much.
The higher your debts the greater your monthly debt payments and so the higher the risk that you will eventually be able to repay your debts. Plus, statistical studies have shown that those with high debt loads have the hardest time financially when faced with a crisis such as a divorce, unemployment, or sudden illness.
Lenders (and credit bureaus who calculate your credit score) know that the more debt you have the greater problems you will have in case you do run into a life crisis.
In order to have a great credit score, avoid taking out excessive credit. You should stick to one or two credit cards and one or two other major debts (car loan, mortgage) in order to have the best credit rating. Do not apply for every new credit line or credit card ?just in case.? Borrow only when you need it and make sure to make payments on your debts on time.
You should also know that taking out lots of new credit accounts in a relatively short period of time will cause your credit score to nosedive because it will look as though you are being financially irresponsible.
Pay Down Your Debts
If you have a lot of debt, your credit score will suffer. Paying down your debts to a minimum will help elevate your credit score. For example, if you have a $1000 limit on your credit card and you regularly carry a balance of $900, you will be a less attractive credit risk to lenders than someone who has the same credit card but carries a smaller balance of $100 or so. If you are serious about improving your credit score, then start with the largest debt you have and start paying it down so that you are using a less large percentage of your credit total.
In general, try to make sure that you use no more than 50% of your credit. That means that if your credit card has a limit of $5000, make sure that you pay it down to at least $2500 and work at carrying no larger balance. If possible, reduce the debt even more. If you can pay off your credit card in full each month, that is even better. What counts here is what percentage of your total credit limit you are using - the lower the better.
Have a range of credit types.
The types of credit you have are a factor in calculating your credit score. In general, lenders like to see that you are able to handle a range of credit types well. Having some form of personal credit - such as credit cards - and some larger types of credit - such as a mortgage or auto loan - and paying them off regularly is better than having only one type of credit.
Best Free Credit Score
If you have had problems with credit in the past and have tried to get a personal loan then you have probably found yourself being turned down time after time. If this is the situation you are in then applying for an adverse credit homeowner loan could be the answer to your problems. A loan of this type can be taken out for almost any reason and the repayments can be extended over many years.
You do have to choose your loan carefully as while there are now many lenders that will offer adverse credit loans, these usually come with very high rates of interest. However by taking out a secured loan you are able to lower the rates of interest, the downside is that you will have to put up your home against the amount that you wish to borrow as collateral.
One of the easiest ways of getting access to the whole of the market place and of being sure of getting the cheapest rates of interest and the best deal is to go online with a specialist website. A specialist website will be able to search around on your behalf with the top UK lenders and then deliver the best deals to you along with the key facts so that you can read what the loan entails.
The key facts hold the small print of the loan and this will tell you of any costs which could be added onto the loan along with the rate of interest you will pay, how much interest will be added on and how much the total loan will cost. It is essential that you do not just compare the APR of the loan but also the terms and conditions because this can make a huge difference to the loan and for a clear picture you need to make good use of all this information. Loan protection can be added onto the cost of the loan without you realising it, although many lenders have now changed their ways and offer it but do not add it, it would be wise to check your loan.
An adverse credit homeowner loan means that you will put up your home as security against the money you are going to borrow and because of this the rate of interest will usually be lower. However due to this your home will be at risk until you have paid off the loan so it is essential that you make sure you can afford the loan repayments and have taken into account that circumstances might change. The amount of money you are able to borrow on a homeowner loan will depend on the amount of equity that is in your home. The equity is worked out by taking the value of your home and then deducting what is left outstanding on your mortgage, so the more of your mortgage you have paid off, the more equity you will have to borrow on. Some lenders will allow you to borrow up to 125% of the equity but for this you can expect the rate of interest to be high.
Both Ainuddin Mohamad & Louis Rix are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Louis Rix has sinced written about articles on various topics from Used Car, Finances and Used Car. Louis Rix is Director of Netloans Ltd, a leading Secured Loan Broker for UK Homeowners offering homeowner loans and Secured Homeowner Loans for any purpose, ensuring that. Louis Rix's top article generates over 246000 views. Bookmark Louis Rix to your Favourites.
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