Learn How To Increase Your Credit
When you apply for a loan the lender will take into account a number of variables. However the variable that weighs the most in determining if you are approved or rejected for a loan is your credit score.
Credit scores are based upon a numbering system from 500-800 often referred to as a fico score. The higher the number the better your credit score is. If you have a fico score near 800 you can buy nearly anything you want. However, if you have a fico score near 500 you may have a hard time getting approved for an every day credit card.
There are several easy steps that can be taken to increase you credit score.
1. Pay your bills on time - This should go without saying "PAY YOUR BILLS ON TIME". Creditors do normally give you a grace period to pay your bills late (usually 15 days). However, you should try to get into the routine of sending your bills out at a minimum of 10 days prior to the payment due date or better yet - when you receive the bill in the mail.
2. Lower your debt ratio - Debt ratio is a direct relation to the amount of money you owe compared to the amount of money you have access to. You want your debt ratio to be below 50%. For example if you have a credit card with a $10,000 limit - You do not want to have a balance above $5,000 (50%). Lowering your debt ratio can be accomplished by a number of means.
a) Pay down your debt. If you have extra cash in the bank it may be beneficial for you to use this cash to pay down some of your credit cards, etc...
b) Get your credit limits increased. Call up your credit card companies and ask them if they can raise your credit limit. Often they will do this with no questions asked.
c) Pay more than the minimum amount due each month. Pay down your bills as much as you can even if its only a few dollars each month. You are paying mostly interest when you only pay the minimum amount due.
3. Decrease your number of open accounts - It is a good idea to have some open credit card accounts because you never know when you will need to fall back on these for emergency purchases. But it isn't a good idea to have too many. If you have some cards that you rarely use such as department store cards (Hecht's, Target, Macy's, etc...) close them out. There is no need to have a card at these stores. All they do is weigh heavily against your credit score.
4. Do not allow your credit to be checked often - One of the least known facts about credit scores is that every time you allow your credit to be checked - it goes down a few points. This makes it hard to shop for the best rates on a loan because in this day and age everyone wants to check your credit. Believe it or not every point counts. The difference between having a 699 fico score and a 700 fico score is quite a bit and can result in the difference between getting an okay loan and a great loan.
5. Get all misreported data off of your credit report - If you obtain a copy of your credit report verify that all of the items listed on the report are accurate. Check to make sure that all the accounts are yours - often if you are a jr. or a II, something from your fathers/grandfathers report will show up on your credit rating. Also quite often someone who has the same name as you may have items show up on your credit report.
If you do not have a credit history (you have never financed an automobile in your name, never got a mortgage in your name, have no credit cards or loans) We recommends that you open a few smaller credit cards and use them each month while paying them off in full. This will begin to show that you are establishing credit to lenders. Also, getting a cell phone may show up on your credit report but make sure you pay the bill each month.
You may get a copy of your credit report at www.equifax.com
