What Can A Person Do To Help Increase Their Credit Score?

 

If you want to improve your credit score yet feel like you’re going in circles, you’ve come to the right place.

In this blog post, we’ll give you a step-by-step guide on how to increase your credit score.

Your credit score is a number that represents your creditworthiness. Creditors use this number to determine whether or not you’re a good candidate for a loan.

The higher your credit score, the better your chance of getting approved for a loan with favorable terms.

What Is A Credit Score?

Before we jump into how to improve your credit score, let’s first answer the question: what is a credit score?

A credit score is a number that ranges from 300 to 850. The higher your score, the better. A good credit score is generally considered to be anything above 720.

Credit scores are based on your credit history, a record of your indebtedness. Creditors report your payments (or lack thereof) to the credit bureaus, who then use this information to calculate your credit score.

8 Ways To Improve Your Credit Score

There are several things you can do to improve your credit, and we will explain what some of them are:

  1. Check your credit report for errors
  2. Make all of your payments on time, every time.
  3. Pay down your debts, especially high-interest debt.
  4. Use a mix of different types of credit
  5. Keep credit balances low
  6. Don’t close unused credit cards
  7. Space out your applications for new credit
  8. Monitor your credit report regularly

Each of these steps is important in its own way, but some will have a bigger impact on your score than others.

Let’s review each step in detail.

1. Check your credit report for errors

Regularly checking your credit report for errors is important to ensure that your credit score is accurate and up-to-date. By catching any mistakes early on, you can save yourself the hassle and expense of dealing with them later.

If you find an error on your credit report, be sure to contact the credit bureau immediately to have it corrected. Remember that it may take time for the bureau to investigate and correct the mistake, so be patient. In the meantime, continue making all your payments on time and keep your credit utilization low.

By taking these steps, you can ensure that your credit score stays healthy and continues to reflect your good credit history.

2. Make all of your payments on time, every time.

One of the best ways to maintain a good credit score is to make all your payments on time. Missing a payment can damage your credit score significantly, so it’s important to stay on top of your finances.

If you’re having trouble making ends meet, talk to your lender about adjusting your payment schedule. You may be able to work out a payment plan that works for both of you.

Pay down your debts, especially high-interest debt

Debt can be a huge weight on your shoulders, especially if you have high-interest debt.

The best way to pay down your debts is to make a plan and stick to it. Start by ranking your debts from highest to lowest interest rate, and then focus on paying down the debts with the highest interest rates first.

Make extra payments whenever you can, and keep your spending in check, so you don’t add more debt to your balance. With a little patience and hard work, you’ll be free of debt in no time.

4. Use a mix of different types of credit

A mix of different types of credit can be beneficial for several reasons. For one, it can help you build your credit score by demonstrating that you can responsibly manage different types of debt.

Additionally, using a mix of credit can help you get the best terms on a loan, as lenders will see that you’re not reliant on any type of credit.

Finally, using a variety of credit can help you stay financially flexible, which is important in case of unexpected expenses or changes in your financial situation.

5. Keep credit balances low

Credit balances are an important factor when it comes to your credit score.

High credit balances indicate that you’re overextended and may have trouble managing your debt. Keeping your credit balances low is one way to improve your credit score and maintain a healthy financial status.

There are a few ways to do this, such as using a budget to keep track of your spending or enrolling in a credit monitoring service.

Following these tips can keep your credit utilization ratio low and improve your credit score.

6. Don’t close unused credit cards

Closing unused credit cards can hurt your credit score so it’s best to let the creditor close the account for you.

Or, if you have an unused credit card, it’s important to keep the account open and active by using it occasionally. This will help prevent your credit score from dropping.

7. Space out your applications for new credit

When you apply for new credit, lenders will pull your credit report hard, which can temporarily lower your credit score.

That’s why it’s best to space out your applications for new credit. Applying for too much credit can make you look risky to lenders and damage your credit score.

Especially if you are looking to purchase a new

8. Monitor your credit report regularly

Monitoring your credit report is the best way to catch errors,  so you can dispute them and get them corrected by yourself or with Pyramid credit repair services.

You can get a free copy of your credit report from each of the three major credit bureaus once per year at AnnualCreditReport.com.

You can also sign up for a credit monitoring service, which will notify you if there are any changes to your credit report. This can be a valuable tool in helping you catch errors early and preventing them from damaging your credit score.

Conclusion

A person looking to increase their credit score can take a number of steps.

They can make sure they are paying all of their bills on time, have a good credit history, and keep their credit utilization low.

By following these tips, a person can work to improve their credit score and get on the path to a better financial future.

 

Author Bio: Eddy is a personal finance and online business content writer at eddyballe.com. He’s focused on helping others with accurate, authentic information for others to read online. When he’s not writing, you can find him drinking coffee and exploring new places.

Check out the recent Redfin article we were featured in:

Micro Apartments: Are These Small Living Spaces Right For You?

Finding affordable apartments has become a challenge, especially as inflation continues
to affect home and rental prices. This is especially true if you’re a first-time renter, like a
student or a new professional. As prices continue to increase, people are looking for
smaller apartments to stay within their budget. A popular option for many people is the
micro-apartment.

7 Quick Ways to Increase Your Credit

If you have poor credit, it can make things extremely difficult. Getting an apartment, buying a car, getting a credit card with a fair interest rate…these are all that much harder with poor credit.
If you have poor credit, you may be wondering what steps you can take to improve your credit score quickly…
7 Quick Ways to Increase Your Credit
Below are 7 quick ways that you can increase your credit score and your credit limit. If you follow the tips below, you’ll greatly increase your chances of improving your credit in the shortest amount of time possible…

1. Get Your Bills in Order (Use a Calendar or Tracker)

The reason many people fall behind on their bills and lower their credit scores is a lack of structure. Many people simply try to pay their bills as they come up. Then they lose their mail, forget to pay the amount they owe, and allow late payments and fees to rack up. These late payments end up causing credit to lower over time.
In order to avoid late payments, get your bills in order! While this may sound like a simple solution, it’s one that most people aren’t considering. You need a bill calendar or tracker. While you can add your bills to your physical calendar or the calendar on your phone, you should consider a separate calendar or tracker for your bills. There are some excellent apps out there that are specifically built to track your bills, expenses, and income. They provide reminders and show you which bills are coming up and when.
Take an hour and punch all of your monthly bills into an app or add them to a calendar. You’ll be grateful for the reminders, and you’ll be able to pay your bills on time.

2. Keep an Eye on Your Credit

How often do you check your credit score? Did you know once a year you are able to view your credit score from the three major credit bureaus for free? You should definitely take advantage of this. You’ll be able to see how your credit is doing and take steps to improve it from there.
Another option is free credit score (estimate) trackers. Some banks actually offer free credit score trackers you can opt into. There are also websites like Credit Karma that offer you free credit score estimates. Keep in mind with these sites, though, you aren’t getting an accurate score. It is only an estimate. Still, it can help you to see if your credit score is potentially going up or down, and to what degree.

3. Set Up Autopay

Portrait of a happy young businessman throwing out money banknotes isolated over gray background

Autopay is such a simple solution that people often forget or ignore it. Others are simply nervous to set up autopay in case anything comes up. With that said, if you have financial stability, there is no reason to avoid autopay.
Autopay ensures all of your payments are made on time without question. On top of this, some companies will actually offer discounts for setting up autopay. Even $5 a month will add up over time. This means you are saving money while improving your credit. Don’t be afraid of autopay! Just make sure you set up your bill tracker, so you know when the payment is going to hit.

4. Address Delinquencies

Delinquencies, collections, and charge-offs are poison to your credit score. If you are delinquent, in collections, or are otherwise so far behind that companies are taking action against you, prioritize these bills and get them caught up. Delinquencies, collections, and charge-offs are some of the worst things that affect your credit score.
Contact your creditor if you have these delinquencies, collections, or charge-offs and see if there is room to negotiate. Oftentimes, companies would prefer some money over no money. If you offer an amount for a settlement, they may go for it.

5. Have Negative Entries Removed

Negative entries can only sit on your credit for a certain amount of time. Your outdated debt is supposed to fall off on its own. If it hasn’t, address these negative entries and have them removed. You can write the company a letter addressing the dispute. From there, the company should address the issue.

6. Avoid New Lines of Credit

The last thing you want to do when you already have a lot of outstanding debt is to add more debt! Avoid new lines of credit. If you are trying to get a new line of credit, the company will pull your credit to see if you can open a new line. This affects your credit score.
The older the credit you have, the better. You don’t want to decrease the average age of your credit.

7. Ask for a Payment Plan

If you are having trouble paying a debt, you aren’t alone. Many people have trouble paying off their debt. Companies understand this. That’s why many companies offer payment plans. With a payment plan, you can pay off your debt over time and show the company you owe the debt to that you are serious about paying off your debt. This can help to reduce your interest payments, which means you’ll end up owing less in the long run.

How Pyramid Credit Repair Can Help

Pyramid Credit Repair focuses on targeting inefficiencies. We check your debt management, spending habits, credit management, and other factors. We also provide thorough credit audits to get a better idea of why your credit score is what it is. From there, we figure out the best ways to improve your credit score. We’ll help you to put together a schedule so you can make on-time payments. We will also help you with disputes and credit restoration.
If you have any questions about what can be done to improve your credit, reach out today. We’ll discuss the different plans we have available with you and help you to find the right plan to meet your needs.
You don’t have to settle for poor credit! We’ll help you to boost your credit in no time!

Suspended Payments on Student Loans Allowed Many to Pay Down Other Debts and Boost Credit

During the pandemic, student loans were suspended. This allowed many to pay off other debts they owed and even increase their credit scores. This provided many Americans with an opportunity to improve their financial stability in a way they have never previously experienced.

The forbearance period for student loan payments has been extended to August 31, 2022. This looming deadline has led many with student loan debts to worry about backsliding.  

Since March 2020 when the government suspended payments on federal student loans, the credit score of the average American rose from 640 to 668 (according to an analysis by the Student Loan Initiative and California Policy Lab). Borrowers were also able to reduce their use of credit cards by around 23%–a massive decrease.

Student loans aren’t the only debts many Americans face. Around 85% of those with federal student loan debt also owe money for mortgages, auto loans, credit cards, and more. The median overall balance for these debts is around $19,121. This brief reprieve from student loan debt has allowed many Americans to start paying these other debts down.

By the end of 2021, an estimated $1.6 trillion in student debt was owed by around 43 million Americans. During the forbearance, they were able to save around $37.8 billion in interest (as per the Bureau of Economic Analysis).  

During the pandemic, expenses have gone up significantly. This is especially so for real estate prices, with the value of the average home increasing by over 20% in the past year alone. The relief students have experienced has helped with their ability to save money, improved their ability to keep up with surging expenses, and improved their ability to reduce the amount owed on other debt.  

This relief will go away in late August, as student loan payments will resume. This leaves millions of Americans to contend with rising prices and major inflation. Because of this, there is an expected surge in delinquency rates once payments resume.

The California Policy Lab and Student Loan Law Initiative have found that one in three borrowers (around 7.8 million people) are at a high risk of missing payments when they resume at the end of August.

While there have been a variety of different proposals to cancel student loan debt over the years, none have moved forward. Joe Biden promised $10,000 of student debt forgiveness per borrower during his presidential campaign, but this has yet to come to fruition.

What is Credit Repair?

With student loan payments resuming, credit repair may need to be considered.

The goal of credit repair is to correct less than perfect credit situations and restore credit. The process requires precision, industry knowledge, dedication, and effective time management. Pyramid Credit Repair is able to provide you with long-lasting results. We don’t offer a “quick fix” solution, but one that can lead to a lifetime of better credit.

How Pyramid Credit Repair Can Help

At Pyramid Credit Repair, we focus on targeting inefficiencies. We take a look at your spending habits, debt management, credit management, and more. We provide thorough credit audits to better learn why your credit score is what it is and then create solutions to resolve these credit issues. One of the best ways you can improve your credit is by paying your bills on time. We take a look at your expenses and bills, then put together a schedule to help with on-time payments. We also look at your spending to see where changes can be made to improve your ability to make on-time payments.

We provide our customers with real-time results, so they are able to track their progress. We also provide our customers with live assistance to answer questions that may come up.

Pyramid Credit Repair understands the challenges that those with student loan debt face and will continue to face once student loan payments resume. It is our mission to work with those that have fair to poor credit to increase their credit and maintain this increase. For those that have increased their credit during the student loan payment suspension, we will work with you to ensure your credit doesn’t drop once payments resume. We do this by helping our clients to better understand their credit scores, answer questions they may have, put together a game plan, and dispute any credit misrepresentations. Plans are available both for individuals and couples.

Pyramid Credit Repair has been in the business of credit repair since 2011 and has grown to be a full-service credit repair company over the years. We pride ourselves on our expertise and stellar reputation. We have helped thousands of individuals and families to reach their financial goals throughout the years.

Some of the things you can expect from Pyramid Credit Repair include hard work, transparency, innovation, and customer service. Our team prioritizes your needs, and we do everything we can to help you to reach your credit goals.

Call or reach out online to learn more about how we can help you to improve your credit once student loan payments return and beyond. We will provide you with a risk-free assessment and we can even help with the dispute process. We work on improving credit scores for all three major bureaus, and we offer a money-back guarantee. There are no hidden fees or surprises with pricing. We are completely open, and we allow you to pay as you go. Our support is available 24/7, and we work one-on-one with our clients to create a personalized plan. There is no “one size fits all approach” to improving credit. That’s why we work with you to put together a game plan that meets your needs.

Reach out today to learn more about how you can improve your credit and/or maintain your improved credit once student loans continue. We look forward to working with you and helping you to achieve your credit goals.

How to Remove a Closed Account From Your Credit Report

It is a popular belief that closed accounts are immediately removed from your credit report. That is a common misconception. Although closing an account restricts you from using it, it does not magically vanish from your credit report as your credit report contains information for all accounts whether they are open or closed. Closed accounts may still affect your credit score until they are finally removed. The good news is that it is possible to remove a closed account. There are three options: request that the creditor take it off, reach out to the three credit bureaus to delete incorrect data or you could simply wait until the closed account eventually falls off your credit report.

 

Closed accounts and your credit score

There are several factors that contribute to your credit score. These include your credit utilization rate, payment history, how old your accounts are, how frequently you open new credit accounts as well as what kind of lines of credit you use. A closed account may have a small or big impact on your credit score and that is based on whether there is still a balance left  as well as the type of credit account. If you close a credit card account, be mindful of your credit utilization rate going up as the credit limit on that account will no longer be available as soon as you close the account. This could be detrimental to your credit score as a higher credit balance with reference to your overall credit limit indicates a higher risk of not paying back your debt. Installment loans, such as auto loans, on the other hand do not have an impact on your credit utilization rate as credit cards, but they do have a positive impact on your credit score as long as you make regular on-time payments. The moment you pay off an installment loan and it is marked as paid in full and closed, the account can no longer boost your credit score; however, the payment history is still part of your credit history. All closed accounts, and it does not matter if they are credit cards or loans, can have a negative impact on your credit score if they have any derogatory marks, which include late or missed payments or were sent to collections. This negative information may remain on your credit report for up to seven years. Closed accounts that are marked as “paid as agreed” may remain on your credit report for as long as ten years from the time they are closed.

When to remove a closed account

Requesting to remove closed accounts that have negative information may be beneficial to your credit score as closed accounts with derogatory information will only damage your credit score further. It is worth noting that which closed accounts should be removed depends on the situation. If the account shows a positive payment history, it would not be a good idea to remove that account as the entire payment history may disappear from your credit report along with the closed account. If a loan is paid off in full, the creditor may remove the payment history of the loan after closing the account as creditors are not obligated to disclose account information to the three credit bureaus. If this happens, your credit score may drop by many points.

 

Paying off a debt may appear to be beneficial to your credit score, but it actually comes with its consequences. To potential creditors, you may seem to be less creditworthy due to the credit history becoming shorter and the lines of credit decrease. Therefore, it would be in your best interest to proceed with caution when removing closed accounts from your credit report and choose wisely which ones should be removed. Even though positive payment history may disappear from your credit history once an account is closed, not all is lost. You may contact the creditor and request that they reinstate your payment history.

 

Sometimes, it would serve you best just leaving a closed account instead of removing it if it demonstrates your creditworthiness. Nevertheless, requesting to remove closed accounts with derogatory information may be just what you need to improve your credit score. Understanding your options will facilitate the process.

Removing a closed account

Removing a closed account from your credit report is a whole process. There are a few ways to make this happen. You have the option to file a dispute when it involves inaccurate information, write a goodwill letter or, if all else fails, wait until the closed account is eventually taken out of your credit report.

File a dispute

According to the Fair Credit Reporting Act, credit reporting agencies are obligated to correct or remove information on your credit report that is incorrect; however, they will only do this if you file a dispute requesting to correct or delete inaccurate data. Disputes to the three major credit bureaus may be submitted online or by mail. Every dispute should include your name, account number, the reason you are filing a dispute as well as documentation that supports your reason for submitting a dispute. Once your dispute is submitted, the credit bureaus are required to review it and contact the lender or creditor to confirm that the information is indeed inaccurate. They have 30 days to complete their investigation and correct the errors if the dispute is approved. If the credit bureau removes the inaccurate information, they can only reinstate it if the lender or creditor provides documentation that the information was accurate and there was never an error.

 

Filing a dispute allows you to request inaccurate information to be removed; however, that does not apply to closed accounts if the information on your credit report is actually accurate. Initiating a dispute with the sole purpose of removing negative information that is accurate will not be considered, but there are still options to request that a closed account be removed from your credit report.

Write a goodwill letter

You might want to consider writing a goodwill letter politely requesting the creditor or lender to remove a closed account along with its credit history. It differs from a dispute as you may request negative information that pertains to a closed account to be removed from your credit history even though it is accurate. Nevertheless, the creditor or lender are not legally required to delete this information if it is accurate.

 

A goodwill letter may be an effective strategy when there are dire circumstances, such as severe illness or becoming seriously injured, which prevented you from working and making on-time payments on a credit card or loan. If you are able explain your unique situation that caused you to default on a loan or credit card and have shown positive payment history in the past as well as have tried to pay off your debt since then, the credit bureaus may consider your goodwill letter. It is worth a try.

 

If you defaulted on a credit card and your balance was sent to collections, you may take into account a pay-for-delete agreement with the collection agency. They may consider removing the collection account from your credit history in exchange for paying the debt in full or paying a lesser negotiated amount. This does not always work with all debt collectors as they are not legally required to remove any collection accounts regardless if you pay off your debt, but it is something to consider. Even if the debt collector does indeed delete the collection account, it does not mean that the negative information associated with that credit card will magically disappear as well. The original account with all the derogatory information that piled up before it was sent to collections will most likely remain on your credit report. Nevertheless, there will be less negative information to show on your credit report.

Wait until it falls off

Your options may be limited if the negative information on your credit report is in fact correct and the creditor or lender are reluctant to delete this information. Sometimes, the only option left is to wait until a closed account ages to the point that it finally falls off your credit report. Negative information on your credit report will eventually be removed from your credit history in about seven years and that starts from the moment an account was reported as delinquent and not when it was closed. It is a good idea to be proactive by checking your credit report a few times a year not only to be aware when closed accounts will be deleted, but also to ensure your credit history is accurate and monitor for any signs of identity theft before it becomes problematic to handle.

Stay on top of your credit history

If you defaulted on a credit card or loan and this was the reason for closing the account, requesting to remove the closed account will help you stay on top of your credit history. Negative information is detrimental to your credit score, but focusing on good credit habits moving forward, such as making payments on time and keeping accounts open and in good standing, will improve your credit score.

What Is Soft Credit Check?

For many people, credit is something that becomes essential at some point in their lives. Consider a scenario where you want to take out a personal loan to pay for medical or educational expenses. Perhaps you and your family are ready to take the next step and buy a home. In this case, you will likely need a home loan. Other examples of credit requirements include buying a car, doing some renovations at home, or even opening an account with a furniture store. – Pyramid Credit Repair

A credit check is part of the process that a company uses to provide approval for such an application. You are also able to request your own credit report which can be helpful and give you an idea of why a specific credit application was declined.

There are different types of credit checks that can be conducted. Soft credit checks are often used initially to provide pre-approvals, as well as when you decide to draw your own credit report. Here we will take a closer look at what soft credit checks are and factors as to why you should consider using this type of check on your credit record.

What Is Soft Credit Check?

Your credit score is important as creditors will use this as an indication of how creditworthy you are. To put this into perspective, if you have a bad credit score, then the likelihood of being declined will become more prominent. On the other hand, a good credit score can pave the way to a new home, car, and other credit applications you may find important. To help provide clarity on what the average credit score is, Value Penguin reported that 695 is the overall mean for Americans in general.

For many people a good credit score is something to be desired, however, there are many people who fall closer to the lower margin of the credit score zone. Unfortunately, those who appear to be on the lower end of the scale may struggle to gain credit as lenders may see them as a liability, so it’s important to keep your credit as healthy as possible to avoid this from happening.

Understanding what factors affect credit score is also important as credit checks can sometimes have a negative effect on your credit score depending on the severity of its findings.

This brings us to a soft credit check. This is a type of credit check that is commonly performed. In most cases where a soft credit will be done, there will only be a small number of cases where a company will need to proceed towards a hard credit check.

A soft credit check is the type of report that you get when you contact a company to draw your own credit record. This type of report shows an overview of certain factors related to your credit report and will generally provide an outlook on your current credit score.

There are some scenarios where a company or employee will request a credit check on your profile. In these cases, a soft credit check will usually be performed. It’s also very important to note that a soft credit check is sometimes called a soft credit pull or a soft inquiry so please be mindful when these terms are being used interchangeably so you do not get confused. Not only this, but you also need to authorize a third-party to perform a soft credit check on your profile.

The majority of cases where a soft inquiry is performed it will not be related to a credit application as creditors will generally require a more in-depth look into your credit record. This inevitably means they will require a hard credit check instead.

The great thing about a soft credit check is that it will not have a negative impact on your credit score. Additionally, there are multiple soft inquiries on your credit record which, fortunately, will not cause your credit score to decline and is the reason why many people will use a soft check when you have not applied for credit.

There will usually be a separate section on your credit record for soft pulls that are performed on your profile. However, these will generally not be taken into consideration by companies who analyze your credit record as soft pulls are unlikely to have an impact on your chances of being approved for a new credit application.

When Is A Soft Credit Check Used?

There are several examples of scenarios where a soft credit check may be used. For instance, the main example would be to request your own credit record through companies such as TransUnion, Experian, or any other credit bureau where you are able to request a report on your own credit record. This is a useful way of acknowledging what is going on with your credit record. Along with this, you can also identify any potential errors and report this to the appropriate credit bureau.

Each credit bureau has its own criteria for requesting a report. Furthermore, the frequency by which you can request a report differs from one bureau to the next. For example, with Experian, you can request a free credit report every month.

When you request a credit report from one of these bureaus, a soft check is done on your record. This means the check will not make any significant marks on your credit record since you did not apply for any credit. Conversely, when a mark is made on your credit record, it usually indicates an increased risk so you should not apply for too many credit applications at once.

There are other scenarios that call for a soft inquiry on your credit record too. Some of these examples can include:

  • Existing creditors may perform a routine soft check on your credit record.
  • Some creditors may perform a soft credit check in order to provide you with pre-approval on a credit application.
  • Some companies may also use a soft pull on your credit record to see if you qualify for specific offers.

You should also take into consideration that renting an apartment may come with a soft check and there are other cases where the rental agency will conduct a hard check on your account as well. Likewise, the same goes for opening a new bank account where some banks will perform a hard check on your record, while others would rather turn to a soft credit pull.

You can, of course, ask the company what type of credit check they will do. Additionally, any company that asks your permission to do a credit check should be able to tell you whether they are going to perform a hard or soft pull on your credit record.

By understanding the type of check done on your credit record, you should have a better idea of what to expect which means you can educate yourself on which credit checks will impact your credit score more than others.

How Does A Soft Credit Check Affect Your Credit Score?

When a company asks your permission to perform a credit check, you should ensure you have sufficient knowledge on how that action will affect your own credit score and be sure to ask the company about the type of credit check that they will conduct.

If the company reports a soft pull will be partaken, then chances are there is no need to worry. This type of check only provides the party that is requesting the data for an overview of your credit report where a copy of your credit score will also be attached to the report.

There is a specific section on your credit report that lists any particular type of soft inquiries that have been conducted on your profile.

Apart from an entry in this section, a soft check that is done on your credit profile will not have any other effects and you will not experience a reduction in your credit score. Moreover, these inquiries will only be stored in this specific section and will not be mentioned on any other part of your credit record.

Soft Credit Check Versus Hard Credit Check

When you apply for credit, want to rent a new home, or need to draw your own credit report, it’s important to understand when a soft or hard credit check will be conducted as they are both different, and each come with their own pros and cons.

Understanding the difference between a soft and a hard credit check is crucial. You should educate yourself on the differences before you authorize any third party to conduct a credit check on your profile. Not only this but understanding how each will impact your credit score should be a necessity as opposed to being nonessential.

A soft credit check, as previously explained, does not have a significant impact on your credit record. Furthermore, you will notice that there is a copy of these soft checks stored on your report as they go into a specific section called “Soft Inquiries.” Apart from this, the soft credit check will not have any other impact on your credit record.

A hard credit check, on the other hand, is quite different as it is the type of credit check that a creditor performs when you make a new application. It is a full credit check that draws your score and the history on your credit record which allows the creditor to gain a  deeper insight into your current credit health. In addition to this, it also provides an overview of your payment history, as well as a history of the previous checks that were performed on your profile.

This information allows the creditor to make a more accurate judgment on whether or not you can truly afford the new debt you have applied for. The information also serves as an important part of the risk analysis as the creditor will consider the fact that giving you credit puts them at risk of losing the money if you are unable to repay the debt that has been lent.

The creditor will usually have a team that considers the risk profile and payment history. This allows them to determine whether or not approval can be granted on the application that you have made.

The problem that you may have with a hard credit check is that it affects your credit record and will cause you to lose a few points. As well as this, many of these checks may cause you to lose about five credit points at a time thus making multiple applications for credit can cause your credit score to rapidly decline.

Another factor to consider is that a hard credit check also goes onto your credit record and any creditor who draws a report in the future will be able to see exactly where you have applied for credit. In addition, they will also be able to use this information, along with other data on your credit report, to determine whether previous creditors provided an approval or decline.

Having a number of hard credit checks on your credit record is also considered a negative factor as this can increase the risks associated with your credit application at the next creditor. In turn, this makes you more likely to be declined for the application you submit.

Should You Be Worried About Soft Credit Checks?

When you notice a credit check will be done on your profile, you may feel concerned as many people have heard that a credit check can affect their credit score. This is true, but only in some cases. So, it’s not always necessary to be concerned when a third party needs to conduct a credit check on your profile as chances are it is just protocol

As mentioned before, a soft credit check does not make a significant mark on your credit profile. Whereas a hard credit check causes you to lose a few credit score points. This isn’t the case with a soft credit check as soft credit pulls still reflect on your credit report, but in a specific section that generally does not affect the risk profile calculated when a creditor analyses your report.

There are also many reasons for a soft inquiry to be performed which is not always directly related to a credit application. For example, an employee may want to perform a soft credit pull in some cases such as applying for a position at a financial firm. You also have the right to see your own credit report  so if you request it, you are doing a soft credit pull from an appropriate bureau.

How To Manage Your Credit Inquiries More Effectively?

If you feel concerned about your credit record, particularly in terms of your credit inquiries, then there are a few tips you can follow. These tips will help you understand how to manage your own credit record more effectively and can also ensure you avoid getting a decline in your credit score due to a significant number of inquiries done on your credit profile.

Firstly, always make sure that permission is asked for a credit check and read the fine print of forms that you are asked to sign – especially if you are asked to provide your social security or identification number.

When you are asked permission for a credit check to be done, make sure to ask the third party important questions: such as what type of credit check will be done? As the third-party requesting permission will need to provide you with these details. Likewise, they will also tell you that a hard credit check or a soft credit check will be performed but it’s also vital to be wary of other names that may be used in reference to these discussions, so always look for terms that refer to“hard” or “soft” when being discussed further.

You should also try to limit the number of credit applications you make as when you apply for credit, some companies will only conduct a soft pull on your record. Although this will not bring your credit score down,  it will still be reflected under the “Soft Inquiries” section on your credit profile. This will only be provided for a pre-approval. A final hard credit check still needs to be conducted later on down the line which will reflect on your credit score and report.

There are also creditors who will directly move to a hard credit check if you apply with them for the first time, so if you make multiple applications in a short period of time, you will start to lose a lot of credit points.

Instead, consider looking at the companies that can provide you with the credit solution you require, then make an application with them and await a response. If the company has declined your application, then ask them for further details as to why it was rejected. This can help you understand why you were declined and even more so tell you what needs to improve on your credit record, instead of submitting your application to more companies.

Conclusion

Credit checks are conducted when you decide to apply for credit or when you request your own credit record. There are two primary types of credit checks that can be done on your record which are both known as soft credit checks,  and hard credit checks. A soft credit check will generally not have a serious impact on your credit report and will not affect your credit score. It is important to understand what a soft check is and what it can be used for and how it differentiates from a hard credit check.

 

What are the characteristics of the best credit repair companies?

A credit repair company is an organization you pay to help remove your information from credit reports. They help you improve your credit so that you can get more or higher loans from other lenders. These organizations are entirely legal in several states, and there is a credit repair organization act that helps to keep them regulated.

When you choose to hire a credit repair company, you expect them to do the following:

  • Remove any inaccurate or unverified information from credit reports
  • Identify any wrongful transactions so that they can help you remove them from your credit reports
  • Talk to you about how to maintain and improve your credit

There are several characteristics that you need to look at when you are choosing the best credit repair company.

Transparency 

You need to ensure that the credit company you use is reliable and will help you to get your credit records right. With so many scam companies on the market today, it is vital that you get the best since you are paying for these services.

A legit company will give you all of their information, including prices, before you hire them. Read their contract carefully and note any fine print so that you can go into the deal with open eyes. Talk to them about what you want from them and ensure that they do just that before engaging their services.

A proper company should be able to answer any question you have to your satisfaction. Make sure they provide you with a full list of services they cover before you hire them to work on your credit.

Affordable Prices

You don’t need to go into further debt trying to fix or improve your credit. This is why you should make sure that the credit repair company you choose is affordable and in your price range.

As much as you need to improve your credit, you might end up owing the credit repair company if you are not careful. Compare different companies and check their prices so that you can find the most affordable one.

The best credit repair company should be able to show you upfront what they will charge you for the services they are offering. Most of these companies will even have a price list on their website so that you can hire them knowing exactly how much you will pay.

Good Ratings

Like most companies, there are other people who have used their services before you. Most of them come back and leave reviews for other customers. Although they might delete any lousy reviews from their website, you might find other social media pages where customers have left their mark.

Use a company with great reviews so you can be confident they will perform the task at hand effectively. Find testimonials that are outside their website so that you are sure that they’re from former clients.

If you see too many bad reviews, you probably need to look for a different company to help you with your credit records. Please do not rely on one single review! Read several reviews so that you can be sure about their services.

A Full Contract

A credit repair company should provide you with a full contract before you hire them. Please make sure the contract is detailed and contains any important information before you sign it. There should also be a price list included in the contract to help you make an informed decision.

When you are satisfied that the details are in order, you can be sure they will stick to the contact you have signed.  Note that, in many instances, you will be paying upfront for these services, so you must make sure you choose the right company.

Money-back Offers

Any company that offers a money-back guarantee is considered legit. This type of guarantee gives you a sense of security so you can be confident that the company will work extra hard to provide the services you’ve paid for. Make sure such promise is included within the contract.

When you are confident that a credit repair company’s services will work for you, there’s no need to search any further. You will hire a company that will give you your money back if you aren’t satisfied. They will work hard to make sure that their customers are happy.

Illegal Requests

No matter how badly you want to get out of debt, you should not resort to illegal activities. If the credit repair organization tells you to lie or use illegal documents, you should find another organization to help you out.

The right firm should not make you do anything that you are not comfortable with. You don’t want to end up in jail or with a lawsuit when the creditors find out that you have lied or hidden any significant information. Take time and check the reputation of the company before you engage with them so they do not put you in a compromising position.

No Pressure

The best credit repair company should not use tactics that pressure you into giving out your information. They should allow you to learn more about them and trust them before they ask you for personal information to look up your credit reports.

If you feel that the company is trying to force you to give out information, you need to stop and look into hiring a different company. Remember that you will be giving out some sensitive information about yourself to these companies. You need to be very sure that you can trust them.

If your data is in the hands of fraudulent people, you may become a victim of identity theft and scams. Some of these scammers will actually resell your information to others who will use it for fraudulent activity. There is a distinct difference between sales and using pressure to make you hire a company.

They Do Not Offer A Quick Fix

Repairing your credit score is not an easy task. It also takes some time, so you need to be patient. A reputable credit repair company should be honest enough to tell you that there is no quick fix if you want to improve your credit.

If you notice that the credit repair company is offering a bunch of quick fixes, it should raise a red flag. Please do not fall for these trickeries because they will end up hurting your credit more.

Settle your debts before you seek to improve your credit. A good credit repair company should help you understand that.

Timeliness

Even though improving your credit might take a while, a reputable credit repair company should give you a timeline on when this might happen. They should explain how they intend to dispute the incorrect information and how they will help you establish good credit.

Any company that promises a significant raise in your score in a short amount of time is probably a scam. All the harmful information on your credit needs addressing, which typically takes even more information to correct. The organization will need time to make it all possible.

On the flip side, if the company takes too long before you see any results, then it may not be legit. You should be able to get a straight answer from them when they talk about their timelines.

Great Customer Service 

Make sure that the company you choose treats you right as their customer. From the moment you introduce yourself, observe how they treat you and other customers. If you notice they are not good at caring for their customers, you need to rethink working with them.

If you notice another customer being treated poorly, it’s likely they’ll treat you the same way, so you need to stay away. They should be professional and prompt when dealing with customer issues or even complaints.

Read reviews about the company and determine how they treat their clients so that you do not fall victim to inadequate customer care. Take time and ask former clients their honest opinions rather than relying on what is on the website.

Be careful not to fall for any scams as they usually lead to more debt. Be sure that any organization you give your personal information to is legit. Scammers are getting smarter and in order to outsmart them, you need to be very cautious.

Ask as many questions as you can. This will help you choose a company that will not drag you down further. Lastly, trust your instincts! If something does not sound right about a deal, then it’s probably not correct.

 

How to Increase a FICO Score?

A FICO score is an analytic notch that combines both human and artificial intelligence to help a lender decide whether to lend or issue a credit to a borrower.

It’s a three-digit number, ranging between 300 and 850, which lenders use to determine your capability of repaying the loan based on your credit information reports.

The FICO score was created by the Fair Isaac Corporation (FICO) in 1956 though the credit history started as early as the 1800s with most credit conducted by businesses and not customers. The financial institutions take advantage of this score to weigh the options of lending money to the borrowers from their creditworthiness history. Over time, lenders guided by this score developed criteria to issue a credit to debtors who had a positive credit history.

How The FICO Score Helps Lenders

FICO scores have been adapted into versions that lenders use to assess a borrower’s credit history and determine their eligibility to future loans. It has several variations: UltraFICO score, FICO ® Score 10, and 10T, among others, that a lender uses, but all converge to scoring the borrower’s ability to receive credit and repay promptly.

The scores take into consideration five fundamental characteristics to define creditworthiness. Alongside other details that lenders use to determine the borrower’s ability to repay debts, these five key elements take precedence.

Payment History

A borrower’s credit score is based on their payment history, with 35% of their credit score for each scoring model. This model is an indicator that shows if borrowers pay their bills on time or not. Borrowers with excellent payment history score higher to prospective lenders than those with a bad history.

The Current Level of Indebtedness

Debt levels are a good measure of a borrower’s ability to borrow more from other lending institutions. The outstanding debts and the flow of obligations determine the lender’s level of trust to extend more credit to a borrower. Government debt and an individual’s debt history with lending institutions are considered when determining whether a lender will end more debts when approached. The borrowers with low levels of indebtedness are at an advantage to scoring high on their FICO score to the prospective lenders than those with a high level of debt.

Types of Credit

A borrower’s ability to increase their credit limit is not only an opportunity to spend beyond their means but also a way of handling emergencies once they come knocking on their doorstep. A higher credit limit boosts a borrower’s FICO score. For a borrower to qualify for more, they must consider the three C’s of credit: character, collateral, and capacity.

Collateral

Collateral is what a lender accepts as security to extend debt to a borrower, which the lender can seize should the borrower fail to repay. It is the security for the credit issued. Typically, collateral is in the form of assets that can be sold to pay off the loan. The collateral should be easily convertible into cash to recover the loan.

Capacity

The lender will not extend credit to a borrower without confidence that the loan will be paid back. The borrower’s ability to repay the loan earns more points on the FICO scale. Lenders will scrutinize whether the borrower has been engaged regularly in a job that can sustain their credit use. They look at salary, other loan repayment history, and the number of dependents. Using these criteria, they determine the borrower’s ability to repay the loan.

Length of Credit History

Any lender is required to know how long a borrower’s account has been open and active. A borrower with a free and active account will score higher on the FICO scale than the contrary. An account with a good payment history and no default history will also score higher. The lender uses credit scoring algorithms to calculate the average age of a borrower’s accounts.

The most noticeable effects of a borrower’s credit score are determined by:

Credit utilization. A borrower should not use more than 30% of their available credit. Average credit history of your accounts will give useful details about this.

Payment history. Once the credit is extended to you by a lender, make sure that you pay on time. This credit history will add a positive FICO score for you as the borrower.

New Credit Accounts

A borrower who has many credit accounts is considered less reliable on the FICO score. There is a higher risk of lending to a borrower who has opened several new credit accounts in a short period of time. The lender risks losing their money to this kind of borrower, especially if they do not have a long credit history. Therefore, it is advisable that a borrower refrains from opening too many new accounts at one time in order to sustain their average account age. This earns positive points toward the FICO score and increases opportunities for loans.

How To Increase A FICO Score By A Borrower

Now that we’ve examined what a FICO score is and what lenders look for from a borrower’s credit history, we can underscore what is required of a borrower to increase it.

Do not open new accounts too quickly

A borrower should maintain the same credit account for a long time to secure trust in the lender. Opening new accounts too promptly decreases confidence by the lender to extend credit. Regardless of how long a borrower has had a positive credit history, opening new accounts lowers their FICO scores. Therefore, increase the FICO score by maintaining an average account age.

Besides, an account holder ought to assess themselves using their credit reports to ‘rate their shopping’ from the lender. FICO considers the age of your account and scores your eligibility to acquire more credit.

Check your credit reports for inaccuracies

Obtain a financial statement from your agency and check for any inaccuracies or incorrect information. Dispute any errors from the report and make sure your credit report is accurate. If a failure in your financial statement could negatively affect your creditworthiness, fix it with your agency so that you do not appear riskier to a lender. The negative errors on the reports could cost you the ability to obtain loans in the future and increase associated interest rates. Increase your FICO score by eliminating common mistakes in your account.

Pay bills on time

35% of a FICO score’s calculation is based on your ability to pay bills on time to lenders and creditors. Use payment reminders on your bank’s portal to alert you when the due date nears for repayment. You can also set up automatic payments with your bank and loan lenders to make transactions from your accounts. By having a clean record of on time payments, you will increase your FICO score.

Reduce the debts you owe

A FICO score’s calculation bases your financial discipline on the amount of debts you owe. If you keep your balances low on credit cards but have an overall high amount of outstanding debt, you will score low. Therefore, it’s advisable that you reduce your current debts before reaching out for a new one. Having many debts does not decrease your score, but the FICO score looks at the overall ratio of money you owe to the amount of credit available.

Every borrower wants to obtain some sort of loan for their specific purposes, whether it’s to start a business, grow their business, or other intended use, and they expect that if they apply, they will get a positive response. On the contrary, every lender wants to extend a loan to a reliable borrower with confidence that it will be repaid in full, promptly, and efficiently. It is in this dilemma that borrowers and lenders want their intentions addressed without flaws. A borrower should maintain a FICO score between 670 and 739, with 670 being the minimum and the latter being the maximum. This range indicates “credible” credit history, and both lenders and borrowers are happy issuing credit and getting repayment promptly.

 

 

 

How To Improve Your Credit Score Fast?

The credit history of a borrower is a base for lenders to extend loans to the borrower. Therefore, borrowers should position themselves where lenders will undoubtedly give credit to them without fear or favor. Their credit history should be flawless. Convincing a lender that you will repay the loan promptly is the key to winning the loan. It is up to the borrower to determine how to improve their credit score fast so they can secure opportunities to obtain even more credit and the lender to work in their favor.

What is a credit score?

The credit score model was designed by Fair Isaac Corporation and is used by lenders as a consultation tool amidst other credit-scoring systems that exist. The score is a range of numbers between 300 and 850 that portrays a borrower’s creditworthiness. The higher the score, the better it is for the borrower and vice versa.

Potential lenders consult a borrower’s credit history before determining whether they offer credit or not. They assess the likelihood that an individual will repay loans successfully. The metric used to calculate a credit score is credit consumption or the current credit availability percentage.

It is then in the borrower’s best interest to keep all accounts active and open to maintain their credit score and work towards improving it. Borrowers with credit scores below 640 are referred to as subprime borrowers. Lenders do not extend much credit to them as they are considered a greater risk than those with higher ratings. Borrowers with scores greater than 800 are considered excellent.

From a borrower’s perspective, your credit score dictates whether you will get approval to obtain credit and what interest rate you will be charged on the loan.

How To Improve Your Credit Score Fast

The following are some tips that can help a borrower to improve their low credit score fast.

Correct errors in your credit report.

As a potential borrower, always request your credit report from your agency. Print it and save it to your workstation. Scrutinize all the details. If there are late payments or unpaid bills, fix them as soon as you can with the respective agency. You may need to borrow for an emergency, but you will be out of luck if your credit report denies you the chance. By keeping track of your reports, you increase the chances of scoring high enough to obtain credit.

Become an authorized user.

If you’re unable to secure a loan on your own, you always have the option of becoming an authorized user on another person’s account. This can improve your credit score fast to leverage your reputation in the eyes of the lender. Ask someone with good or excellent credit if they are willing to entrust their account to you. Be up front about your intention to be added to their account to improve your creditworthiness and not necessarily to use their credit. The moment he agrees and adds you as an authorized user, you will earn confidence from the lender.

A three-month credit report will reflect the primary cardholder’s good credit history and this consequently improves your credit score.

Raise your available credit.

By raising your available credit, you improve your credit score fast enough to merit obtaining loans quickly. There are various ways of doing this and getting approved quickly.

  • Do not be greedy or overly demanding. Make a polite, non-pushy request to your lender for a credit increase. If it works out in your favor, you will enjoy an improved credit score and obtain a fast approval for your request.
  • Apply for a new card with a higher credit limit. A new card with a higher credit limit will entice your lender and secure your approval for a loan. You can obtain this by making an inquiry with your credit card issuer to increase your credit limit. If the issuer asks why you want a raise in the limit, be honest and explain that you want to improve your credit score fast.
  • Plead your case, but do not be desperate to get approval. Seeking to improve your credit score fast does not mean that you should do anything for the favor. Do this only if you are unable to pay on your balances and retain your credit score. This presents you as liable to obtain more credit in the future.
  • Ask about a balance transfer. You can raise your available credit by transferring some of the balance from one account to another account. By increasing the account credit, your score will speak for you. Later, you can refund the transfer after receiving a better credit score.
  • Wait for an increase to occur naturally. Get approved fast when your credit limit increases naturally. Through your upright history of repayments and borrowing, the credit agency will naturally increase your credit limit and alert you.

Reduce the debt-to-income ratio.

To improve your credit score fast, increase the amount you pay monthly towards your debt. This extra payment lowers your overall liability and gives your score a boost. Avoid taking on more debts that might be challenging to pay. Additionally, postpone large purchases on your credit card. These all play a part in improving your credit score fast in the eyes of your lender.

Negotiate outstanding balances.

Unpaid bills and debts can really deteriorate your credit score. You can rectify this by approaching your lenders and creditors to negotiate a way of repaying the debts. This agreement should be in writing. On the contrary, you can settle the debts by paying a large lump sum, resolving it, or revising payment plans with the debt settlement manager. This will repair your credit score and improve your credit score fast.

Make minimum payments on time.

If you aren’t already, start being consistently punctual in making minimum payments to your lenders. You may not necessarily have that lump sum available to offset your debt, but you can remain on top of the game by maintaining a timely payment schedule. The credit score calculator will not disappoint you. You can improve the credit score fast based on the amount you owe versus how much credit you have. Therefore, owe little and have a lot of credit for the ratio to work to your advantage. This ratio is the credit utilization ratio that favors a borrower who pays down debts quickly to lower the ratio and quickly improve their credit score.

Pay twice a month.

Potential creditors will look at your monthly statement to determine your credit score. Repaying your debts twice a month as opposed to once a month gives you an edge on your credit score. By reducing balances on revolving accounts, you will enjoy fast and improved credit scores.

Apply for credit only when necessary.

The main objective of obtaining credit is to address a financial need, an emergency, a development need, or other pressing issues. The lender decides on the risk of offering credit and that consequently impacts the rate of interest. Therefore, it is advised to apply for a loan only when necessary and avoid interest charges at the risk of being unable to pay back the loan. From a creditor’s view, a borrower who has a good reason for applying for a loan earns more on the credit score than one without. This also portrays a borrower’s good financial discipline.

Use your credit cards responsibly.

It is highly advisable to use your credit cards for needs and not wants. Avoid the common temptation to misuse your credit card and you’ll also avoid the possibility of weakening your credit score. Observe these simple tips to use credit more responsibly.

  • Learn your credit score and work on improving it regularly.
  • Do not close all of your accounts if you want to maintain or improve your score.
  • Never close accounts with high-interest rates as this reflects your inability to repay your lenders.
  • Use credit cards for small purchases periodically. This displays your financial discipline and lenders borrow your eligibility information from this scorecard.
  • Never skip a payment. Always honor your payments as in agreement with your creditors.
  • Stay under 30% of your total credit limit. This will increase a creditor’s confidence in lending to you.

Request to have all negative entries removed from your credit report.

A history of late payments on your credit report looks bad to your lender. It may be tricky to obtain a loan or credit based on this bad report. Any unpaid collections and late payments will negatively impact your credit score and should be addressed. Understandably, presenting a credit report with negative entries when seeking consideration from lenders won’t have positive results.

The good news is, you can negotiate with your agency to have all negative entries removed from your credit report so you can present an excellent report to your lenders. Convince your agency to show the account as paid or remove it altogether to reflect the right image in your favor.

A borrowing credit journey is unique for everyone. The lenders rightly apply many criteria in deciding the creditworthiness of an individual borrower. Many factors affect the credit score for different borrowers, but all should be addressed regarding how they present themselves. The credit score should be subjected to each borrower and not wholesomely since the factors that apply to most borrowers will not always impact credit scores in the same way to another borrower. The bottom line is that each borrower is required to improve their credit score fast enough to secure financial legacy in the eyes of the lender. It is worthy to note that your credit score and an examination of your creditworthiness directly determines how much or how little you might pay for your loans.

How to Get the Highest Credit Score Possible

Attaining a perfect credit score is not easy. But having a good score will save you money in terms of interest over time. For VantageScore and FICO, the highest credit score is 850. Their scale ranges from 300 to 850. If your rating is above 720, they will consider it a good score. However, it can be difficult to maintain a perfect credit score every month.

Even if you are consistently responsible with your credit habits, do not be surprised if you don’t get a perfect score. Your scores are bound to fluctuate as they represent your credit profile. The ratings are broken down into poor, fair, good, very good, and excellent. The only way you can achieve the perfect credit score is by using your credit lightly, paying on time, not opening a new account, and having extended credit history.

Generally, older people have higher scores than younger folks. Having a score of 850 is excellent, and you will have bragging rights. Still, a score of 800 and above is exceptional. With this score, you will have access to reasonable rates on auto loans, credit cards, and any other loan.

Pay On Time

Be careful with your payment history as it heavily influences your credit score. In fact, payment history is the most influential factor for VantageScore and FICO. To ensure you always remember your repayment obligations, set up a reminder. Alternatively, you can opt to enroll in an automatic repayment system.

Timely payment applies to all of your bills, including rent, utilities, and phone services. The question many people ask is: what if they made late payments some years back. In response, while missed or late payments stay on your report for up to seven years, their impact on your score will decrease over time.

After two years, very few negative items have an impact on your score. Just keep making your payments and, ultimately, you will achieve the perfect score.

Monitor Your Scores For Any Inaccuracies

Errors and identity theft may derail your progress in having a good credit score. It’s important to get your credit score often, monitor your credit, and buy credit education tools. There are several credit reporting agencies where you can get your report at least two times a year.

If you notice something inaccurate in the report, you should write a dispute letter to all the credit bureaus. There are three: Equifax, Experian, and Transunion. The increase in your score after a dispute depends on the impact of individual reports. If you had late payments earlier, disputing one inaccurate amount will do little to change your credit score. However, if you can prove that several accounts were opened falsely in your name, there will be a considerable change in your score.

Keep Credit Utilization Low

If you want to determine your utilization rate, you should add credit limits to all of your cards. When you are spending lower than your available credit, your credit utilization rate will also go down. You should strive to use less than 30% of your available credit.

Be Strategic When Taking New Debts

Credit scores consider all of  your outstanding loans and your total credit card balances. Generally, it is a great idea to keep your debt load low as it improves your score. Applying for new credit every time will make lenders think you are not able to handle all the debt.

However, you should not avoid getting new loans if the purpose is right. After all, the main reason you build your credit score is to ensure that you get financing when necessary. As long as you prove you are responsible and never fail in your repayment obligations, your score will stay intact.

Finally, you need to think critically before closing an old account. Having an available balance will help you with your credit utilization ratio. Additionally, old accounts help your report and also boost your credit score.

Do Not Make It A Habit To Cancel Cards

You should have one or two credit cards that you always keep active. You should not cancel them as they will help you creating a long credit history. Additionally, it will help you have a low rate of credit utilization. Having many credit cards means you have more credit available. A high credit score is for those who have a lower credit utilization ratio and long credit histories.

Consider Your Credit Mix

The different types of loans in your history is worth considering. The scoring models look into how you responsibly manage the different types of loans, credit cards, financing, and mortgages. If you want to diversify your investment, you should consider taking low-interest loans.

Moreover, if you have avoided credit cards, you should open one to charge a small amount every month and pay it off immediately. If you have an attractive credit mix, you will be able to have a high credit score. Avoid taking any financing that you do not need.

Limit Your Hard Credit Inquiries

Every time you apply for new credit, it will generate a hard credit inquiry. When you apply for a new loan, it is interpreted that you are having financial troubles. The hard questions bring about a negative effect on your score. Only apply for new credit when it is vital and avoid hard credit inquiries.

Importance of Understanding the Credit Score

For most people in the U.S, the credit score falls below 620. In fact, 40% of individuals under 30 years old have a score of less than 620. 25% of people under 30 have a score of 630 to 680. Only 2% have a score of above 780. This clearly shows there is plenty of room for improvement to get a good score.

Understanding how the credit ranges work is vital in giving you the knowledge and motivation to improve your score. A good score will provide you with the financial ability to have better interest rates on loans, credit cards, and mortgages.

Is it Necessary to Have the Perfect Score?

You may be wondering if it is essential to have a perfect credit score. While it’s certainly great to have a credit score of 850, it may not be realistic. Besides, having an excellent rating will give you the same benefits as a perfect score.

Theoretically, the highest possible score is 850. Nonetheless, only about 3% have achieved a score of above 800. Furthermore, less than 2% of people below 30 years of age have a score of 780 and above. In other words, it is almost impossible to have a score of 850.

When you apply for a mortgage or buy a car, the lender uses your credit report. They expect you to fall into a specific category. The interest you qualify for will not change if you are within a particular range. For example, if you are eligible for a 4% interest rate, it will not change until you reach the next tier of the credit score range.

What is The Range?

It is common for many people to wonder what the range is. For FICO, their credit score range is 300-850. Having a score above 720 means your score is good. Additionally, FICO offers industry-specific scores such as auto loans and credit cards that range from 250 to 900.

Below are FICO’s credit score ranges:

  • Poor credit: below 500
  • Fair credit: 580-649
  • Good credit: 650-719
  • Very good credit: 720-799
  • Exceptional credit: 800-850

Lenders know the higher your score, the lower the risk. Nonetheless, no rating says whether you will be a bad or good customer. The FICO reports are just based on statistics and past undertakings.

Why the Credit Score Ranges Matter

You do not need a perfect score to get reasonable rates on your mortgage or loan. If you have a score above 700, you are safe and will qualify for low interest rates. With a score above 770, you are assured of some of the best rates out there.

Credit card companies and banks do not care about the specific numbers you have in the reports. They are more concerned about your broad credit score range. An example, if you improve your score from 750 to 790, very little will change on your interest rates offer. Both of these scores fall in the same credit range. However, moving from 630 to 700 means you will get better offers on the interest rates. You do not need to obsess about every single point to achieve the highest possible score. Moreover, it is not advisable to open a new account if you have a score of 800 or above because you already qualify for the best terms.

A Score of 800 and Above

Having a score of 800 will not give you the perfect score, but it will undoubtedly give you an exceptional credit score. It will also provide you with the same terms of the loan with someone who has a score of 850. Here is what people in the 800 club have achieved:

  • They use only 7% of their credit limit.
  • They owe less than $3000 on their credit cards.
  • Their credit history is over 25 years.
  • They do not have late payments.

Benefits of Knowing Your Credit Score

You must know your credit score if you want to understand the possibilities that come with raising it. You will see clearly what you qualify for and how it affects the interest and repayment period. You will also better appreciate the kinds of improvements you can make to raise your score.

Conclusion

Whereas having the perfect credit score is not a requirement to have the best rates for mortgages and loans, it will come in handy in the long run. Improving your scores from poor to good, or having them move from good to excellent, will make a big difference. By following the correct credit habits, you will improve your scores. If you are lucky to reach 850, you should consider it a bonus. You will be among the very few to achieve it!

 

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