Credit scoring is run as a profitable business these days which has allowed credit scores to encroach into areas of ones life where once they had no influence. As the importance of credit scoring rises and more emphasis is placed on having an excellent score, more side line business’s have increased offering to improve your score or track your score monthly: all for a hefty fee of course.
However if your score is less than perfect it is perfectly easy to raise it without paying for assistance as long as the basic Fico scoring algorithm is understood. Those who are new to credit and have a history of less than 2 years credit use cannot obtain a perfect credit score as 15% of the algorithm comprises the length of ones credit history.
The longer the better counts so if an important loan such as a mortgage was needed it would be better to wait until a 2 year credit history was established before applying in order to obtain the lowest interest rates. Those who have a longer credit history can increase their score by retaining their oldest lines of credit and using them occasionally.
The most important factor when increasing your credit score is that payments are made in a timely fashion. This is best achieved by paying credit cards on monthly automated payments and always being responsible over payments. Those with very bad credit or poor credit will probably need to use a secured credit card in order to demonstrate responsibility.
The debt to credit ratio is key to improving your credit score. It is important not to use more than 30% of your available credit thus it makes sense to either increase your credit limit or open another credit card if you typically run a balance of more than 30% of available credit. If you run an even higher balance this will definitely impact your credit score negatively. Ideally no more than 30% of available credit should be used and all balances paid off in full at the end of the month.
Applying for too much credit or not having a mix of credit can affect your credit score, so be sure that the loan you apply for is likely to be granted. If it isn’t and you apply for another one the second application will be accompanied by a reduced credit score as a knock on effect of applying for the first loan. Obtaining a loan will improve your mix of credit if it is typically revolving credit on cards.
Improving your credit score will not only help you to obtain your loan, but a loan at preferential interest rates. Before you apply for the loan obtain a copy of your credit reports and check for any errors which should be rectified. Thus you will need to consider in advance and do this at least a month before applying for a loan.
Remember though that your credit reports are an accurate picture of your use of credit and only negatives which are recorded in error can be removed. Correct information, no matter how damaging, will remain for up to 7 years.