How To Improve Your Credit Score

How to improve your credit score

Credit score is an important parameter when it comes to loan approval. For a lender to make a decision on whether or not to approve a loan, credit score is needed to ascertain the level of risk. Low credit score indicates a risky borrower and most financial lending institutions would hesitate to approve a loan. On the other hand, a good credit score is an indication of a low risk and a lender would approve the loan if all other requirements are met. A borrower with a good credit score can also negotiate for a favorable loan term among other benefits that come with good credit. Therefore, it is paramount for any borrower to build a good credit rating. In an event that your credit score has been low and as a result, affects your ability to get a home financing loan, all is not lost. You can improve it, increasing the chances of getting that loan approved. Here are a few tips on how you can improve your credit score.

Timely payment of bills

It is important that all your bills are paid on time since late or default payments affect your rating. To ensure that the bills are paid on time and are being reported to the credit reference bureau, you need to track them. It’s important to know when they are due and how much is supposed to be paid. Missing a date or even paying less than required will make you a candidate of credit reporting, thus negatively affecting your credit score. If you have an issue keeping track of the bills, setting up direct deposits will help you as they will be automatically settled when due. All you have to do is ensure that your account has enough funds to settle these payments.

Only take credit when necessary

Taking credit or a loan just for the sake of it will lead to payment default when you cannot raise enough money to settle debt. It is important to make sure you really need that credit before filling out those forms. While you should take into consideration if you need the credit, it is also very important to maintain at least 3 revolving credit lines that are always kept at or below 30%, with no late payments to show the bank/lender that you have a history of credit and that you UNDERSTAND debt. Minimum payments also hurt you. Pay off as much as you can every statement term. Also, a very common mistake is closing out an account that has a $0 balance. Closing accounts HURT your score. Always keep old revolving credit lines open, just keep the balance under 30%.

Take charge of your credit profile

You need to have an active credit account that monitors all your loan or credit obligations. Make sure you get all your credit reports and take the necessary steps based on the outcome. As a result, you will increase your score and the chances of getting an approval or even a higher amount. A common misunderstanding is that your credit score on those online monitoring sites will be the same as the one the lender sees. Seldom is it the same. Lenders do what is called a "hard-pull". This means that they are going to see every little thing that you have done from the beginning. Lender scores tend to be between 20-50 points lower that what is shown on those popular sites, so don't be shocked when you go to apply for financing and it's not as high as you thought. Those sites are good, however, for monitoring and keeping track of your lines of credit/debt and to give you a rough idea of where you're at score-wise. 

At A to Z Capital, we can help get your score where we need it to be in order to qualify for a lower rate loan. While we do hard money loans for scores as low as the 400's , the terms and rates aren't going to be as good as someone in the 600's. The higher the score, the better for the borrower. Give us a call and let us work with you in order to get you the best deal!  561-609-6699  or email at [email protected]