Generating a decent credit score is called credit rating. It is essential as it can impact your capacity to borrow money. It also affects your capability to access loans and credit cards. Checking your credit score for free is a smart call. And if you find that your score is questionable, you can take steps to improve it.
Understanding the credit score
The credit score gets generated from the data in your credit report. It’s also called the credit file. Your accurate count might vary between lenders. It might also differ between the different financial products from one lender. The data included in the credit application form and credit file can be used to determine the following:
The recent data on your credit file will impact the lending process. It’s because the lenders are keener on your latest financial situation. However, both your good and bad business decisions that date back to six years will be there on record. For instance, if the credit card report highlights a couple of missed payments, the lenders might charge an increased interest rate. Or better still, some of them might decide you don't qualify for loans. The money lenders might feel lending you money might increase their risk.
Hence, your credit history impacts whether or not you can get things such as insurance. Monitoring your credit report is a smart call. Other than maintaining a good score, it also helps you to detect any fraud activities that might take place without your notice.
Enhancing your credit score
Wondering how to improve your credit score? You can use the four methods discussed here to improve your credit score.
1. Ensure that the credit report is precise
It is the initial step for enhancing your credit score. Everybody owns three credit reports. And each of them comes from the three leading credit bureaus, namely TransUnion, Equifax, and Experian. The credit reports might have some errors.
A study conducted by the Federal Trade Commission, back in 2012 discovered that one out of every five customers might have a mistake on the reports. It got followed up by another study done in 2015. The study suggested that people who reported an error that's unsolved, their credit reports were considered as flawed.
Your credit score depends on the information available in your credit card report. Making sure that the data is perfect is essential. If there's a mistake in the credit report, the credit score will show it.
Checking your credit reports is easy. You receive one free copy annually. And all the three credit reports come under Fair Credit Report Act. The free reports can be accessed from selected websites annually. Even the FICO scores, function between the range of 300 and 850.
2. Know what you have to work on
When you notice one mistake in the credit report, doesn’t indicate it’s giving you bad credit. For instance, if your name gets misspelled in the personal data, that won't cause your credit score to go down. There are many other reasons why a particular error might show up. The reasons include the following:
3. Have a plan to enhance the credit score
When your credit report data is precise, you know your mistakes and how to rectify the same – it’s time to create an action plan. Observe the way the plan influences your credit score gradually. Get necessary guidelines on the concern areas. To enhance your credit score, you need to keep the credit card balance low. Also, make sure you pay all the debts instead of shifting it around. Don't close an unused credit card. It will not work as a quick fix method to enhance your credit score.
Last but not the least, don’t try to open a new credit card account that you won’t require. You shouldn’t attempt this searching for a means to maximize the available credit you have.
4. Go ahead and solve all your late payments
Most people think that if they close an account, it will make all their late payments go away. It is far from the truth. So, what's the best thing that you can do here? Just pull yourself back to a right track. And for that, you can do several things. For instance, you can create payment due date alerts in all the credit cards, loans to follow an organized schedule. You can also shift the credit card payment due date slightly on the lenders or bank website. Make sure to keep a check on the amount due dates in association with the paycheck schedule.
You may also want to check with your lender or credit card issuer if they are okay to forgive a late payment. It could be that you were on vacation out of the country and you lost the cheque in the mail. You probably didn't know that a bill was present. In particular, the credit card organizations are understanding. Just in case your record shows that you’ve been making payments on time, the company might consider.
The delinquent payments might stay on the credit report for as many as seven years from the exact date of a missed payment. The initial date is called an "original delinquency date" reported by the credit bureau. Until you've crossed thirty days from the specified time of payment, the bureau won't take it as a late payment.
Having a favorable credit score is essential. You might want to start a business and need to loan money. If you have an adverse credit score, chances are you won't be able to borrow the amount you need to start a business. So, it’s imperative to improve your account. You can take the four steps as easy guidelines and start right there.
