Credit bureaus such as Equifax and Trans Union create a credit score for you based on information contained on your credit file. The information that goes into calculating your credit score includes your payment history, your usage of credit, what type of credit accounts you’ve had, whether you have any accounts that are in collections of have been written off and the amount of times your credit file has been pulled by lenders recently.
Having a good credit score can always be beneficial. It helps you qualify for a variety of credit products, such as mortgages, car loans and credit cards. Lenders are more likely to give lower interest rates to individuals with a higher credit score. If you’re looking for ways to improve your credit score, here are a few things that you can do:
Pay Down Your Credit Card Balances
One factor that can lower your credit score significantly is having a too high credit utilization ratio. This means that the balances on your credit cards are getting close to your credit limit. The reason why this lowers your score is because it shows that you’re in debt and are thus a higher risk for lenders to extend you more credit.
By paying down your credit card balances, you’ll help your credit score rise over time. Making efforts to pay off your debts has many other positive benefits, such as reducing the amount of interest that you pay.
Ensure That You Have Active Accounts With a Positive Payment History
Having a good payment history is the most important consideration that goes into determining your credit score. Many individuals that have accounts that were charged off, closed for non payment or sent to collections find it hard to reestablish their credit, as few lenders are willing to do business with them.
Some of them may consider a applying for a title loan and wonder how a title loan affects your credit score. Taking out a title loan can be a good way to boost your credit score, especially if you don’t have any active accounts that show a recent payment history on your credit file. By making your monthly payments on time on a title loan, your credit score will begin to rise again.
Only Apply For Credit When You Really Need It
Whenever you apply for credit and a lender pulls up your credit file, this counts as a “hard pull” and lowers your credit score by a couple of points. While the number of requests on your file only has a small impact on your overall score and it quickly goes away, you should be careful only to apply for credit products when you actually need them.
Check Your Credit File For Inaccuracies
Your credit file could contain some inaccurate items, such as accounts that don’t belong to you or accounts reported as past due that you have paid off a long time ago. These inaccuracies could have a negative impact on your credit score. For this reason, you should obtain a copy of your credit report from all of the major bureaus and contact them immediately if there are any entries that don’t seem right.
