Improve Your Credit Score Quickly With These Tips – When you apply for or buy new items, a “credit check” is automatically done to determine if you have enough money to cover any purchase. Unfortunately, it can take several weeks or even months before your credit file is updated and you are able to get approved for a new loan. To avoid that delay, you can quickly improve your credit.
You should start by checking all of your credit accounts regularly. Then make changes wherever possible. Try to limit purchases and focus on paying bills on time. Be sure to close old accounts promptly. Keep your credit utilization ratio (CUR) below 5 percent as well. If your CUR is higher than 3 percent, it is considered too high and will put significant pressure on your credit.
Most states also require minimum credit scores for some types of lending. Otherwise, your score may be lower than what is required. Remember, when we say “apply for” or “buy,” we mean to ensure “your payment history” or “your history of making payments”.
How do I know my credit score?
The first step towards improving your credit score is to take out a free consumer credit report from each of these companies. The three major credit reporting agencies are Equifax, Experian, and TransUnion, but there are many smaller ones as well.
Once you take the report, your account will instantly appear in the online queue, so you’ll need to wait until you’ve been approved for that new item before you can start using your cards or other forms of bank accounts. But once approved, you’ll immediately see how much you owe on your existing loans, which in most cases will not be reflected in your reports.
For example, let’s assume you already owed $5,000 on an auto loan or $10,000 on a house loan. Even though they all have low CURs of 2 and 5 percent, these amounts will show up in your balance in as little as a few days. After two weeks, the only amount that has not yet shown up is your current outstanding payment on your car or home loan. At this point, consider whether you would like to pay off these debts immediately to prevent their negative impact on your credit.
What does your credit report look like?
Your credit report shows both your gross monthly income and your total debt. Here’s an example of it: You may be surprised to find that you only owe about 5 percent of your annual earnings. This is because your credit score gives lenders much more weight than your net worth.
What are your acceptable credit utilization ratios?
Your credit scores are made up of several factors, including Your historical data. Your actual income on credit. How well you’ve managed your finances throughout the years. As you’re working on keeping track of everything, make sure to keep track of all the things on your list. Also, it can be beneficial to review other financial data, such as mortgage balances and past-due unpaid invoices.
Don’t forget to monitor your credit utilization ratio. A ratio of 2 percent or less is ideal. Avoid spending more than this. It can negatively affect your rating and increase your interest rate. Instead, aim at a ratio between 1 percent to 3 percent. This number reflects the average of your past six billing statements over the last 12 months.
For example, let’s say you went from having a credit score of 680 to 760. In one billing statement, you were paid off your $600 auto loan within 60 days, meaning you only used that $600 to pay your bill. However, you then use another $800 or more on your next bill – $800 in rent, $800 on groceries, or whatever else happened to be on your credit card.
By simply going the extra mile and using those additional funds to pay off the previous bill, you lowered your credit utilization ratio from 56 percent to 47 percent – making now an excellent time to borrow on your credit cards or other lines of credit. On top of that, your credit card issuer might actually reward you with a better rate on future purchases if that same ratio is maintained. You don’t want to risk hurting your credit rating or getting into debt.
How long does it take to get my file updated?
If you don’t take action right away, you may lose some or all of your progress. But, you can still increase your credit score and increase it fast! Before applying for a loan, it will only take a day or two to update your account. Typically, your credit files get updated every 90 days.
So if you were interested in closing on a great deal on a gift on Christmas Day, now is the time to go ahead and take advantage of that opportunity, since your eligibility will be added to the system within 24 hours. There are a variety of tools available right now to help you stay informed as well. One way to make updates faster is through mobile apps, which may be integrated with your smartphone for added convenience.
Another is downloading your personal credit report. You’ll see where you’ve been recently paying down debts and what loans you need to repay. It will also tell you where your payment history stands against the others on a quarterly basis, so you can better plan ahead and work backward. Take note that it’s important to take regular steps to ensure that you’re staying on track with any new debt arrangements.
Make sure to write down any transactions and dates on them as well, since it would be rather difficult to remember to do so. Always remember to call the credit bureaus every year for a complete view of your account. That way, you’ll have a good idea as to whether or not your actions are impacting your score. And if, in fact, it does, know that the effects on your credit score are temporary.
They won’t be permanent. Only a small percentage of people who are denied a personal loan is ultimately unable to pay it back.