Are you struggling to get approved for new credit cards or loan approvals? Your credit score may be the culprit. While it’s not an exact measurement of your financial responsibility, a credit score can reveal how you handle money and other risk factors that lenders use to determine whether or not you’re a safe bet. In the United States, almost all lenders use the Fair Isaac Corporation (FICO) score as their primary measure of your creditworthiness.
A high FICO score indicates that you are very likely to repay any potential lender and therefore will see much better rates and terms on your loans, mortgages, and credit card offers. Conversely, if your FAICO score is low, you will have a much harder time getting approved for new loans or credit cards. If this sounds like you, don’t worry! Improving your credit score isn’t as intimidating as it sounds. Here are my 5 best tips to improve your credit score and raise your credit limit:
Check Your Credit Report and Scores
Your credit report is like an audit trail of your financial activity, and shows what your credit score approximations are. This can help you to find anomalies in your credit report and correct them with the credit bureaus. In particular, you want to be on the lookout for accounts that are marked as “in collections” or “charged off.”
These are negative accounts that can significantly lower your credit score. You can dispute these items on your credit report with the credit bureaus. You can get a free copy of your credit report from each of the three major credit bureaus every 12 months by visiting AnnualCreditReport.com.
If you want to check your credit score, you will have to pay for it. But if you are trying to get a loan or a new credit card, it is absolutely worth the cost. Be sure to check your credit report and credit score as often as you can, especially as you’re working to improve your score. This way, you’ll know if you need to take action to correct something that’s dragging down your score.
Be Careful With New Applications
Applying for new accounts, like credit cards, can have either a positive or negative impact on your credit score. If you have bad credit, you may get an initial credit line that is significantly lower than average.
That’s because lenders are taking a risk by extending credit to people with low credit scores. If you have a high credit score, though, the opposite is true: Lenders want your business and may give you a high credit line just to have you as a customer. The best way to approach this situation is to be selective about which new accounts you open. Just because you got approved for a new credit card doesn’t mean you have to use it. In fact, if you have a low credit score (or if you’re trying to improve it), you should be careful with the new accounts you open.
Just one new account can have a significant impact on your score. But if you’re trying to improve your score, don’t open a bunch of new accounts at once. Opening multiple new accounts at the same time can actually hurt your credit score because it looks like you are trying to “game the system” and exploit the fact that your score is low right now.
Pay Your Bills on Time
This is probably the most important factor in your credit score. If you have bad credit, you may be tempted to pay off a past due account, but it will not help your credit score at all. So, if you want to improve your credit score, pay your bills on time.
This means not only credit cards and loans, but also utilities and other recurring bills. The easiest way to do this is to set up an automatic payment with your bank. This way, you won’t even have to remember to do it.
If you have many accounts and have a hard time keeping track of everything, you may want to use a service like Mint or Credit Karma to help you keep your finances in order. Just make sure you are very careful about the information you share with these services. That brings us to our next point.
Review The Reasons For Your Score
The best way to improve your credit score is to make sure you know what’s hurting it. You can check your credit report for free once every 12 months at AnnualCreditReport.com. Look for discrepancies in your report and make sure they are valid. If you find something that is inaccurate, you can dispute it.
In order to make sure that your credit score improves, you should know what is dragging it down. Did you recently take out a car loan? Did you recently have a credit card account sent to collections? Are you paying off a student loan? Each of these factors will have a big impact on your credit score.
Raise Your Credit Limit
Credit cards are generally the easiest way to improve your credit score, so you may want to consider asking for a higher credit limit. This will increase your overall credit utilization ratio, which is a factor in your credit score. In order to do this, make sure that you are in good standing with the lender.
If you have an overdue payment or are not making payments at all, they will not be able to increase your credit limit. If you are in good standing, you can call the lender to ask them to consider increasing your credit limit.
Don’t Apply For New Credit Constantly
Applying for new credit cards and loans will have a negative impact on your credit score, but it is only temporary. Your credit score will decrease because it looks like you are desperate for money. If you have bad credit, banks may see you as a risky investment.
However, if you have good credit and you have the funds to back up your applications, you may be approved for a larger loan amount. If you’re trying to repair your credit, you don’t want to apply for new credit cards and loans constantly. Credit bureaus see this as a sign of desperation. Instead, you should have one or two large credit lines that you pay off in full each month. Then, occasionally apply for new credit cards and loans. Just be careful not to apply for too many at one time.
Revive Old Trades And Accounts
If you have been a member of a rewards program that offers credit bumps in the past, you may be able to revive that account. Call up the service and ask if it is possible to bring back the credit bump. If you have old memberships that offer free memberships, you may be able to revive those accounts as well. Be careful, though, that you do not try to falsify information or lie in order to get credit bumps. This could get you in more trouble than it’s worth.
Your credit score is important. Not only do lenders use it to decide whether or not to give you a loan, but also how much they charge you for it. If you want better interest rates, lower payments, and more approved loan requests, it is important to keep your credit score high.
Related Courses: Credit Analysis Skills Training Courses