Whenever you apply for a loan, the lenders/creditors check your credit score to judge your creditworthiness; the higher the score, the better for you to take out a loan with favorable terms and conditions. So, if your score is low, you should try to improve your credit score before applying for a loan.
Here are few tips that can help you to improve your credit score.
1.Pay your bills before the due date
One of the most essential steps for improving your score is to pay your bills on time. If you cant remember the due dates, then you can set up automatic payments from your bank accounts so that you dont miss out the due date. Make sure you have enough money in your bank accounts in order to avoid overdraft fees.
2.Do not close your longest credit account
You should never close your oldest credit account even if you have paid the balance in full. Closing your credit accounts reduces your total available credit, which in turn, affects your
credit utilization ratio (the amount of your outstanding debt by your total available credit). This may reduce your credit score to some extent. It is advisable that you dont close your unused credit accounts before paying off your outstanding debts.
3.Transfer balances to avoid max out credit cards
One strategy to improve your credit score is to transfer the balances from a card (which is about to reach the credit limit) to several cards so that you can keep the balances below 25% of the available credit limit. If possible, pay off some of your credit card bills in order to reduce the outstanding balance in your cards.
4.Dispute negative information
It is advisable that you order and monitor your credit reports at regular intervals and check whether or not there is any inaccurate negative information in your report. For example, look for any outdated information, accounts that dont belong to you, late payment whereas youve paid on time, etc. If you find any, then fill out the form supplied by the credit bureau and send it along with the documents to support the fact.
When you apply for a new credit, the credit card issuers may make inquiries to decide whether or not to grant your request. A number of inquiries may mean that youre taking out too much debt, which in turn, may reduce your score. So, try to limit the inquiries within a span of 45 days as multiple inquiries within this time limit is treated as only 1 inquiry by the credit bureaus. It will help you to improve your credit score to some extent.
