How to Get Better Credit Scores
How to get a better credit score is simple, but a lot of work. We made this credit guide to help you think about and plan raising your credit score.
Having excellent credit allows you to get the best rates for financing large purchases like vehicles and houses. The better a credit score you have, the lower interest rate you will have to pay for credit cards or mortgages, including re-financing your debt to pay off faster. It can even be the deciding factor in getting hired for certain jobs.
Here’s how to get a better credit score and how it can better your finances:
Repair Your Credit
If your credit score has anything negative affecting it, you’re going to want to repair your credit. This can be done many different ways, including deleting incorrect information, paying past due bills, paying off debt and diversifying the types of debt you have.
You may have unpaid accounts listed on your credit report that are paid or invalid. Removing these inaccuracies will greatly increase your credit score.
You can do this by yourself by disputing the accounts that are wrong, or hire a credit repair company to do it for you for a low rate.
Pay Down Debt
Paying down your debt is one of the quickest ways to improve your credit score. Total credit utilization can affect your score 30%, a major part of your credit score. In addition to paying down your existing debt, you can lower your credit utilization by opening new lines of credit. This increases the ratio between total credit and the amount of it you use.
There are many ways to lower your debt, but to keep it simple, you need to make more money than you spend. Then, take that extra money to pay down your debt.
Diversify the Types of Debt You Have
There are two main types of debt – revolving and installment. Revolving debt typically is credit card debt, but can also include home equity lines of credit. Installment loans are loans paid at a fixed rate over time, such as a re-finance, car loan or mortgage.
Open a New Line of Credit
While opening a new line of credit does lower your credit score a bit, it also can lower your credit utilization. Credit inquiries are only 10% of your credit rating, while the amount owed in comparison to your credit line is 30% of your credit rating.
You can learn in depth about credit ratings and how your credit score can be impacted at www.consumerfinance.gov
Credit Scores and Ratings
Credit ratings are often referred to as FICO scores, which are a combination of the 3 major credit bureaus. Each credit bureau has various products it sells to different industries, like car loans, rent checks and mortgage companies.
They can also work with background check companies to provide information such as employment and resident history.
Bad credit is no good. People and businesses with bad credit pay the highest rates and can often not find financing at all. Bad credit scores range from 580 to 649, Credit scores below that range are considered very bad, or poor credit.
Fair credit is quite common. It ranges from FICO scores of 650-700. With this credit score you can get approved but may not get the best interest rates.
Good credit ranges from 700 to the 750 range. They typically get good interest rates and have options when choosing where they borrow money from.
Excellent credit is hard work. Credit scores above 750 enjoy this status, along with the highest credit lines and lowest interest rates.
Long credit histories, low debt utilization, and no recent inquiries can help you get excellent credit.
Keeping Good Credit
Once you have good credit, keeping it is easy with good financial habits. Your credit score will get better over time if you stay consistent.
By keeping a good credit score, you are more likely to get better deals, so it’s definitely worth the effort. Whether it’s credit card APR, personal, auto or home loans – better credit scores get better interest rates.
Do you have any other ways to raise credit scores? Comment or share this article on social media to let us know!