Your credit score influences many aspects of your life. Not only do lenders use it to determine whether to give you a credit card or loan, but insurance companies, landlords and employers also use it to assess your worthiness. A good credit score can help you land a job, make security deposits for utility turn-ons unnecessary, lower insurance rates and get you approved for a rental home. If you have bad credit, you may deal with denied credit applications, difficulty finding a place to live, problems getting the job you want and higher interest rates overall.
You probably already know the basics for improving your credit score, such as making all your payments on time. However, if your score isn’t quite where you want it yet, there are five more methods you can use.
1. Diversify Credit
Dozens of data points that indicate credit risk go into figuring your credit score, which credit repair companies like www.ovationcredit.com can help to untangle, but you need to know why your credit score is low to begin with.
Your credit account mix, often called your credit diversity, looks at different categories on your report. For example, if you only have credit cards, you could improve your score by adding an installation loan or mortgage.
Lenders want to see that you can handle multiple forms of credit responsibly. You show this by branching out into these categories and building a history. If you’re only applying for a new loan product to introduce more diversity into your report, consider a store charge card. These accounts are unique to a particular business, such as a fashion retailer, and may offer useful rewards.
2. Pay Down High-Balance Cards
Talking to http://www.myfico.com/ about your credit can help you figure this step out, but just be aware that you need a strategy for paying off your debt. You have to do more than pay your credit cards on time if you want to get as many points as possible for your score. Credit utilization has a major influence on your numbers, and it’s one of the factors you directly control. It is calculated by looking at your revolving credit balances and comparing those to your overall credit limits. High utilization percentages are undesirable and bring your score down. By keeping the overall and individual card usage low, your score gets a real boost.
Do you have extra money to put toward your debt? Consider focusing on your high-balance cards if you need to improve a credit score quickly. A few extra points before you apply for a mortgage could save you a lot of money over the long term due to lower interest rates.
3. Increase Your Credit Limits
Another way to adjust your credit utilization percentage is by changing another number in the equation — your overall credit card limits. If you have a good relationship with a lender and your payments are on time, you can ask for a credit limit increase. Whether or not your request is granted depends on several criteria and differs with each company. If you are denied, ask for reconsideration if you feel that you do meet a lender’s criteria.
4 Keep Long-Term Accounts Open
Have a 10-year-old credit card you don’t want? Before you call up the company to close it, reconsider. Your credit history is another big influence on your score, and it’s averaged across all your accounts. If you close an old card, it no longer contributes to the length of time that you’ve held lines of credit.
The only exception to this method is a card with an annual fee. If you have to pay to keep the card active, you need to weigh the potential score benefit with the money you’re throwing at the card. In some cases, it may make sense to cover the fee, but some lenders charge too much.
5. Group Your Loan Inquiries
When you apply for a car loan or a mortgage, you may want to compare quotes or go through a broker. The process of applying for credit creates a hard inquiry on your credit report. This indicates that a third-party has examined your credit information as part of a loan application process. Its opposite, a soft inquiry, occurs when you or a third party look at your report for other reasons, such as an account review for a credit limit increase. Since the information isn’t used for creating a new line of credit, it falls into a different category.
Too many hard inquiries bring your score down when you’re loan shopping, but you can get around this by grouping your credit inquiries within a specific period. Every loan inquiry made within this time span counts as a single inquiry, so you limit the hit to your credit score. Exactly how long you have depends on the credit reporting agency and ranges anywhere from two weeks to a month.
Make a concentrated effort to keep these inquiries tightly grouped. If you don’t think you have the time to apply with all the lenders you’re interested in within a given time span, consider using a mortgage broker to help you streamline the process.
Credit scores can dictate where you live and work, as well as how large your lines of credit are. By using every method available to improve your credit score, you can improve your financial health and save money with lower interest rates. These methods are an excellent way to work on improvement after you use all the basic techniques.