Enhancing Your Credit Score

What Is The Credit Score Ranking?

A credit score comprises of  a three-digit figure usually ranging between 350 and 850. While 700 is considered a good score by lending institutions to grant you loans at their current best interest rate, anything significantly over 700 could earn you a still better interest rate while anything less on your credit score would result in your having to bear a higher interest rate, provided a loan is granted at all. Due to the importance of a good credit score in firstly obtaining a loan and secondly at the best going rates, we give below some tips on how to enhance your credit score, which we hope will help you to achieve the objective of improving your credit score.

How Is Fico Score Different From Credit Score?

Get you credit score, also called the FICO score after the company named Fair Isaac Corporation that invented this model for computation of credit scores. Your credit score can be obtained from any one the three credit bureaus, namely, Expedia, TransUnion or Equifax.

The credit score will show you all the details of your outstanding debts that are dragging your credit score down. Paying off these debts by cutting off some of your non-essential expenses would see your credit score turning to the better. When settling outstanding debts, it would be prudent to settle in the descending order of the highest interest bearing loans.

Even if you have the capacity to pay the monthly credit card balance in full, it is not a good practice to utilize it to its maximum limit especially at a time when you are trying to improve your credit score. Utilizing to a maximum level of 30% of the approved limit is a good basis, which will also impress your prospective lenders in deciding to grant you credit. There are various software applications for use of those who are unable to keep a proper tab of too many credit transactions.

Credit Report Errors

Since credit scores are known to contain errors due to various reasons, make it a point to check your credit score regularly and get any errors rectified immediately in consultation with the credit agency from which you have obtained your credit score.  This will prevent your credit card from showing a bad picture of your financial situation over a long period of time, which will be the case if errors go undetected and uncorrected.

Keep not more than a couple of credit cards so as to be able to keep a better tab on your transactions and their due dates for payment; and also for the reason that you will not be tempted to avail of more credit than is really good for you. You will keep the oldest credit card from your lot since it is good for the credit score to have very old credit with continuity and properly maintained. Out of the other credit cards, keep the credit card with the lowest rate of interest and settle in full and cancel the others. If the oldest credit card you retain happens to be with a high rate of interest, then you may use it sparsely, using the other card more often for your transactions.

If you had genuinely overlooked to pay a loan installment on time you may speak to the creditor concerned to get the delay off your credit record. The creditor is likely to oblige, provided you bring it to his notice promptly; and depending on how well and for how long you had maintained that account. 

Sometimes you may refuse to pay an amount that you feel is not justified. If the amount involved is insignificant, the collection agency too is most likely to ignore it.

How Credit Score Is Affected?

Your credit score could be affected with items from one or more of the following categories such as charge offs, paid or settled charge offs, collections, and negative items appearing over a long period including negatives that really don’t relate to you, late payments, reported low credit limits, listed accounts of payments as agreed as well as listed accounts as unpaid, and paid derogatory etc.

Raising Your Credit Score

Raising your credit score might take some time and you should not expect immediate results. Carry on settling your loans and bills on time while keeping a close watch on your credit limits in addition to ensuring that old loans are settled. If you stick to these criteria in the short as well as the long run, then you have nothing to fear about a random background check being conducted by a prospective lender on your credit record for the approval of your loan application.