Credit scores are essential since they determine future eligibility for any financial assistance from financial institutions. Thus, if you have a low score, it is more than likely that you may not get a home loan or mortgage. All you need a better credit score.
Many compare credit score improvement to losing weight. The idea is to hold patience and not look to any quick solutions, as they tend to do more harm than good.
Some good ways to keep control on your credit score is as follows:
Payment alarms:
One of the most important factors which help keep the credit scores good is timely payments. The best idea is to provide the bank where you have an account direct debit instructions. This means that the bank should be given standing instructions to deduct the amount on due date. Further, minimum amount due should not be paid. Whenever possible, opt for paying the entire bill value.
Errors and differences:
There are times when the credit card company makes errors. One can dispute these errors through designated agencies in this regard. Hence, you should scrutinize the statements carefully.
Monitoring balances:
You should be able to manage the score by better control over the revolving credit balance of the card. The lesser the ratio, better the credit score. In order to keep this factor in check, experts suggest to ensure that the balances are kept low by constantly paying them off on time. This is better since even if the entire balance is paid off, it does not negatively affect the utilisation ratio. Thus, it could still remain higher since the statement balances usually get reported by the banks to the bureau. Thus, credit scores will still reflect the monthly balances in spite of full payments each month.
Credit limit:
You must keep real time track of changes in credit limit. If the card issuer has forgotten to update the new credit limit in the statements, then bring it to notice immediately. This is so since regularly exhausting the credit limits completely does not look well. Thus, reducing the credit utilisation will translate into better scores. This can be also be done by taking advantage of pre-approved offer based credit cards which increase the total credit available. A word of caution here is to choose the card issuer carefully. Be wary of those issuers with high rates of approval since they adversely impact credit scores even if for a little while. Ensure the new card does not have annual charges and is low on interest charges.
Usage:
You may want to have one to three credit cards. The use of plastic will do wonders for your score. This is subject to being a responsible user. Thus, make payments by due date positively. Experts nowadays advise to go for a secured credit card which has reporting obligations to all the major credit bureaus.
Time:
For those who wish to improve their credit eligibility, the issue is usually credit history. Reasons such as delayed payments consistently and defaulting on dues, add negatives to the credit report. Negative actions such as delinquencies remain on record for up to 7 years, bankruptcy and tax liens – 10 years and inquiries up to 2 years.
Credit report accuracy:
A study conducted by the Federal Trade commission in 2012 stated that error in credit reports had a recurrence ratio of 1:5. You should always ensure that the credit report is reflecting accurate details of your position. This is essential since the credit line is based on this report. These reports can be accessed relatively easily online. The errors if any found should be reported to the issuer. Reports from all the 3 major credit score institutions should be checked, since error in anyone can impact your credit limit.
Debt management:
It is advisable to leave old debts on the report. They basically are evidence of debts which have been paid in a timely manner. This shows good credit worthiness. Further, old accounts where the payment record is impeccable is preferred as well. Thus, advisable to let them be on the report longer.
Negotiation:
There are instances where due to some unforeseen exigency payments are missed. You should attempt at getting the creditor to agree in writing, for a settlement. It can either be a complete removal or a “paid as agreed” reporting from his end. This can usually be done through a letter where you promise to pay the balances unpaid on date. One may also apply for removal for negatives on account of past history where there were no misses.
Regular and responsible use of the credit card aids in enhancing the credit score. Hence, automatic payments are suggested to ensure that deadlines are not missed. Some people also try to use other people’s good credit history. This can be done by getting added as an authorised user in their card. You should also refrain from unplanned card applications as the inquiries for the same impact the credit score as well.