Basic tips to improve your credit rating
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Lastly, the Bankruptcy Equity Home Loan Guide would like to offer you some basic tips in improving your credit rating. Your credit rating is key in helping you find lower interest rates, and will generally allow you to keep you options open in just about anything financially based that you encounter throughout your life.
- Make sure your bills are paid on time, and in a consistent fashion. This is probably the most important factor that determines your credit score. Occasional late payments aren’t a huge deal however, if this becomes a habit it will likely be detrimental to your credit rating. Also make sure you’re no later than 60 days on an individual payment.
- Your balance-to-limit ratio must be kept reasonable. This ratio compares the amount of credit currently used to the total credit available to you, the borrower. Keeping this low (having not much debt with a higher percentage of available credit) is good for your credit rating. In turn, a balance over 75% is considered high and will affect your credit rating negatively.
- Keeping a reasonable amount of unused credit. Don’t try and get yourself a huge line of credit especially in proportion to your earnings. Banks and credit unions will look at this and automatically classify you as a high risk borrower.
- Don’t inquire about/open multiple credit accounts within a short period of time. Inquiries should be limited to one or two per year and new lines of credit should not be opened up if you are not able to keep your existing ones under control. This type of ‘credit frenzy’ can make lenders nervous and is also bad for your overall rating.
- Have patience, credit doesn’t build itself over night.
- Maintaining a well balanced mix of your accounts, both ‘revolving’ credit accounts as well as installment loans, will show that you can maintain your finances responsibly.
- Keep tabs on your own rating. Nobody else is going to do this for you. Some companies will even neglect to tell you if you account status with them has changed. Also check your credit report frequently to make sure that it is accurate and without error. Keeping an eye on your credit at all times is of utmost importance.
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