It is not as difficult as you think to raise a credit rating. It is well known that lenders will provide people with higher credit ratings with lower interest rates on mortgages, car loans and credit cards. If your credit rating falls below 620, getting loans and credit cards with reasonable terms is difficult.
In the United States, more than 30 million people have credit points of less than 620, and if you are probably wondering what you can do to raise your credit score.
Here are five simple tips you can use to boost your credit rating.
1. Get a copy of your credit report
It’s a good idea to get a copy of your credit report because if there is something wrong with your report, you will increase your credit rating after deleting it. Be sure to contact the bureau immediately to remove any incorrect information.
Your credit report should come from three main bureaus: Experian, Trans Union and Equifax. It is important to know that each service will give you a different credit rating.
2. Pay bills on time
Your payment history is 35% of your total credit rating. Your recent payment history will have much more weight than what happened five years ago.
Missing just one month of payment can repel from 50 to 100 points of your credit rating.
Paying bills on time is the best way to start rebuilding your credit rating and increase your credit rating.
3. Pay off your debt
Your credit card issuer reports your outstanding balance once a month to credit bureaus. It doesn’t matter if you pay this balance in a few days or transfer it from month to month.
Most people do not realize that credit bureaus do not distinguish between those who keep a balance on their cards and those who do not. Thus, by taking less, you can increase your credit rating, even if you pay with your credit cards every month.
Lenders also like to see the big difference between your credit card debt and your total credit limit. Thus, the more debts you pay, the wider this gap and the better your credit rating.
4. Do not close old accounts
In the past, people were offered to close old accounts that they did not use. But with modern valuation methods that could damage your credit rating.
Closing old or repaid credit accounts reduces the total amount of credit available to you and increases the balances that you have in calculating credit scores. Closing your old accounts can actually shorten the duration of your credit history, and for a lender it will make you less creditworthy.
If you are trying to minimize the theft of personal data, and you should calmly close your old or paid accounts, the good news is that this will only reduce your account to a minimum amount. But simply by leaving these old accounts open, you can increase your credit rating.
5. Stay Away From Bankruptcy
Bankruptcy is the only worst thing that will ruin your credit rating. Bankruptcy will lower your credit rating by 200 points or more, and it is very difficult to repay.
Once your credit rating drops below 620, any loan you receive will be much more expensive. Bankruptcy of your credit history is reported for up to 10 years.
The reality of bankruptcy is that it will restrict you to high interest lenders, which will crowd out high interest rate payments from you for many years.
It is better to get a credit consultation to help you with your accounts and avoid bankruptcy at all costs. By receiving credit counseling instead of declaring bankruptcy, you can increase your credit rating over a much shorter period of time.
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