How To Fix Your Credit Score

How To Fix Your Credit Score

A good credit score is typically one ranging from 600 and above. Finding yourself with a low credit score may be a bit of a pickle, especially if you need to apply for credit. We have put together this detailed read to answer all your credit score related queries and help you fix low score.

How Are Credit Scores Calculated?

Most people have more than one credit score. Credit scores depend on several factors, including the credit card company giving the score, the data used to arrive at that score, and the method used to calculate it.

The form of credit scores used by credit card lenders varies based on the kind of business they practice. Some creditors will choose a credit score that reflects one’s payment history in that particular industry.

The following aspects are considered when calculating your credit score. The kind of information emphasized in each credit score depends on the credit bureau’s type of scoring.

Factors Considered When Calculating Credit Scores

  • The total number of accounts a credit cardholder has

Calculations to determine credit scores consider the number of credit accounts a customer has opened in the recent past. New ones affect your credit history and, consequently, your credit rating.

  • The types of credit card accounts in question

Credit bureaus also consider the various types of credit accounts you may have and how many you have in each category. These include credit cards, mortgages, student loans, personal loans, and other similar financial products. If you can manage your credit correctly without neglecting either, lenders will look upon you more favorably. Read more about the most common Citi Credit Cards.

  • A comparison between the amount of credit used and available credit

Creditors always take a keen interest in the amount of credit you have used and those you still have available. Looking at this information can help them determine if you are a responsible spender or one who seeks to max out their card first they get. If you use and pay off credit sensibly and on time, credit lenders will have no problem extending you more credit. Credit cardholders who have maxed out most of their cards or reached their credit limit are not likely to get more credit.

  • How long a customer has used credit services

A customer’s credit history directly portrays how long all their credit accounts have been active. While new accounts may make it harder for lenders to assess your creditworthiness, older ones give them an insight into your credit behavior, positive or otherwise.

  • A credit cardholders payment history

Lenders and creditors like to ascertain that customers can pay back the credit offered on time before they choose to commit. Your payment history helps a creditor decide whether to offer you credit or not. How have you paid your credit in the past? To accurately analyze your payment history, lenders have to look at your mortgage loans, credit cards, department store credit accounts, student loans, home equity loans, and more. If you have taken out a financial product in your lifetime like online money borrowing, the chances are that the level of commitment and punctuality you applied when paying it off will be considered as well.

This history also shows a lender relevant information concerning any late debt payments, missed payments, and situations like collection, foreclosure, and bankruptcy. Some credit card users make payments diligently and on time with some cards while neglecting others. Your payment history will compare those cards you have paid off and the ones you have defaulted on to determine your credit scores.

How To Fix Your Credit Score

Essential Tips to Increase Your Credit Score

  • Register on the electoral roll – If your name is not on the electoral roll, you’ll find it much harder to get credit. You can register online from the comfort of your home.
  • Correct any mistakes on your file – The slightest bit of false information can come between you and a good credit score. It doesn’t matter if it just a misplaced letter in your name or a wrong current address. Ensure all your details are correct and report any wrong information as soon as you realize it so measures can be taken to rectify the issue.
  • Pay your bills on time – be sure to pay all your home and office bills on time. That is a great way to show creditors that you are a responsible and reliable customer. Strive to make these payments punctually, or else you’ll seem like a customer who does not have their finances in order.
  • Check if you are linked to someone else – Joint accounts with family and friends may not be such a good idea after all. If they have a low credit rating, it will automatically affect yours since the joint account links your financial information as far as that particular account is concerned.
  • Check for fraudulent activity – It is essential to check all your financial information for any issues regularly. If someone has fraudulently applied for credit in your name, how they manage that credit will be featured in your credit scores and reports unless you report such activity.
  •  Court Judgments – Woe unto you if you have received court judgments or orders regarding debts. These are mostly issued when one defaults in paying credit and the respective lender have sought legal action against you. Such activity connected to your credit account will affect your credit score negatively. You can avoid this by making all monthly payments without fail and refraining from taking overdrafts or exceeding credit card limits.
  • Large existing debts – A good credit customer pays off any outstanding debts for considering new ones. If you have much debt, creditors interpret that to mean a lack of commitment to pay and irresponsible financial habits. To avoid accumulated and multiple debts, borrow only when you have to and pay before applying for more credit. Some people even borrow more credit to pay off old ones. That may seem like a good idea until you find yourself stuck in a vicious cycle of unending debt.
  • Moving homes frequently – Creditors are bound to feel safer extending you a line of credit if you have a permanent address. Moving every few months or years will make you appear unreliable ad unpredictable.
  • Maintain low credit utilization – Credit utilization is measured by reviewing how much credit you have been offered and the amount you have already spent. If you have used most or even all of your available credit on all your credit accounts, lenders get the picture that you are an irresponsible spender who cannot be relied upon to pay back the credit. You can remedy this by paying an amount higher than your fixed monthly payments each month. That will help you pay off your debt faster and put you in lenders’ good books. It is also essential that you only use credit for emergencies or unavoidable circumstances. This way, you will only use a small percentage of your available credit, reducing your debt, and simultaneously improving your credit score.

This is a guest post from our fellow blogger at Tien Day Vi.