Credit rating determines our financial capabilities. Having a good credit a person can count on the financial support of lenders to solve arising problems and finance large purchases, such as buying a house. The series of global financial crises, aggressive consumption promotion and inflation, eating away incomes made the state of one-third of Americans’ loan condition much to be desired. How can this obstacle be overcome to a prosperous financial future? If you are interested in the answer to this question, read this guide to improve your credit.
How does a credit rating get low?
In the US there are several credit bureaus that collect information on the borrowers’ credit behavior and determine the credit score of each borrower using this information. With the timely fulfillment of all its financial obligations, the credit rating gradually improves, but one overdue payment can drastically reduce it. To successfully control the condition of your credit you need to understand the factors that affect it. For example, one such factor is credit utilization rate or CUR. Even with the timely completion of all payments a high balance on a credit card will decrease your credit score.
- Stay far from credit limits
Credit card companies are interested in making money at an interest rate, providing and increasing your credit limit. So be careful and try not to use the entire credit limit available to you. Do not leave less than 30% of the credit line on the card, as this will lower your credit score. In addition, the more credit you use, the higher interest rate is for you. It is also worth noting that CUR (credit utilization rate) takes into account the total credit limit for all of your credit cards.
- Monitor the status of your credit report
You can get a report on the status of your loan once a year for free. TransUnion, Experian, or Equifax are three examples from several US credit bureaus where you can request your credit report. There will be differences between reports of different bureaus, but they will be insignificant and your credit will be at about the same level. It is also important to remember that in these reports it is not uncommon to see errors that you can dispute and correct. This is why it is important to monitor the status of your credit.
- Always pay your bills on time
One of the important factors that occupy a significant share in your credit rating is the timeliness of your credit obligations repayment. One late payment can greatly reduce your credit score, so do not skip a single payment, even if you have multiple loans and credit cards.
- Get rid of old debts
Your old debts, even written off by the lender, have a very negative effect on your credit rating for several years. The collection agency is also very likely to ruin the condition of your credit. Look for the opportunity to pay off the old hung debt. It may be worthwhile to consider the option of lending from another lender to cover the debts. There are offers for borrowers with bad credit, as well as the possibility of consolidating your debts.
- Reduce credit card balance to zero
Credit cards can be very convenient when shopping, but it is worth remembering that using them beyond measure will cost you much and nothing for free. In addition to the floating interest rate, which increases with debt, you risk spending more than you could afford. You can get into the overdraft, which then will cost you several times more expensive than the purchase. Reduce the balance on your credit card to zero to increase your credit score. You can take one loan for bad credit in order to reduce the balance on your credit cards to zero.
- Do not change lenders
The transition from one lender to another, who has softer conditions, in order to reduce the costs associated with the loan, of course, can make it easier for you to pay off debts, but such transfers negatively affect your credit rating. The same applies to the transfer of balance from one credit card to another. Each transition entails checking your credit by a new lender, that negatively affects your credit.
- Get ready for the long run
Correcting or improving your credit rating is not a matter of a single day or action. In order to get a significant result in this matter you must be prepared for the correct credit behavior for several months or maybe even years, depending on the status of your credit. After you achieve the desired credit score, you will need to maintain it in this state for the next years. But the big way begins with small first steps. The main thing is to start and develop the habit of correct credit behavior in yourself and this will not be difficult for you over time.
Now you have an idea of how you can fix and clear your credit of unnecessary elements and raise it to a high level. You can get more information in our financial blog, as well as contacting our experts for advice.