The recent survey from Credit.com Company states that many of the consumers damage their credit score without even knowing it. A lot of consumers do not really know which actions can improve or damage their credit rating. Let’s look closer at the problem.
The usual indicator for the loan providers making decisions is the FICO credit score, usually ranging from 300 to 850. In case the borrower has the score between 750 and 850 points, he is sure to get the best offers from the lenders with the most attractive terms, conditions and interest rates.
If you know your credit score, you can influence it, so look at the 7 habits below, which may help you to make it better.
Make Timely Payments
In most cases payment history plays the decisive role for the credit rating, 96% of those having the score of 800 have always paid on time. Remember, please, that even a single late payment may be enough to damage your credit. Always make timely payments, even if you can cover only the minimum payment. It’s a good idea to set up automatic payments not to miss a due date.
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Use your Available Credit at Minimum
One more significant factor for your score is the ratio between the debt you have and the available credit at your disposal. Individuals having the score of 800 often use only about 7% of their available credit.
The result will be soon visible if you pay down highly utilized credit accounts. A reasonable decision may be to consolidate balances with a personal loan provided by banks, as the credit utilization ratio is calculated in a special way for such loans and doesn’t influence your score much.
Keep Low Balances
Most of the borrowers with a perfect score maintain low credit cards balances and do not pay interests due to the fact their balances are full every month. Such consumers make credit cards payments only for the things they are unable to cover in cash. As a rule, the credit card debt of people with the score of 800 does not exceed $3,500.
Try to Make Your Credit History Long
Generally the average credit history of people having the score of 800 is about 11 years, taking into consideration the oldest accounts opened 25 years ago. In case you open several new accounts simultaneously, you may shorten the average age of your credit history, the same is valid for closing old even inactive accounts. Besides, closing old accounts makes your available credit less and consequently can increase your credit utilization ratio.
Get Loans Only When You Badly Need It
On the one hand, the healthy mixture of credit lines indicates that the loan providers trust you and ready to give you loans, besides the more credits you have the better your credit utilization ratio is. But be careful and do not apply for every credit line available.
When applying for small personal loans consider all pros and cons carefully. In case your credit history is not long, multiple inquiries from the lenders within a short time can damage your score. Especially careful you should be with car dealers. It’s better to choose a lender first and to be pre-approved already by the time of turning for a car financing.
Be Careful With the Choice of Credit Cards
Even though the consumers with excellent score get the best offers from credit card companies you should be smart to choose among all of them. The credit cards from the retailers, offered while shopping, often have low credit limits, and this is not good for your utilization ratio if you carry a balance on those cards.
Smart consumers choose the cards with a 0% interest rate for the first year and with cash-back rewards or miles, redeemable for the travel, avoiding annual fees.
Monitor Your Credit Score
It’s vital to have a habit of following the credit score regularly. You can get a copy of your credit report yearly from each of the credit-reporting bureaus – Equifax, Experian and TransUnion. It can easily be done online through several sites and services, but the main idea is that you can easily find out errors and send a request to fix them. When you follow your score regularly, you see what drags it down and what improves it, so you can influence it.
Develop the seven habits described above and enjoy the results of your efforts!