How to improve your credit score for getting loans

As the borrower begins the process of improving his credit score, he is required to keep in mind that it’s a marathon and not a sprint, but improving the...

As the borrower begins the process of improving his credit score, he is required to keep in mind that it’s a marathon and not a sprint, but improving the score is worth the effort. A poor credit score can however potentially cost the borrower tens of thousands of dollars over the course of a lifetime. It can however also become a source of serious stress, making the borrower feel like he just can’t leave the mistakes of the past behind and move on. But, luckily, he’s  not alone. Plenty of people, however,  struggle in order to improve their credit scores and there are a lot of things the borrower can do to build good credit — and reap the rewards that come along with a good credit score.

  1. Create a Plan to Improve Your Credit Score

If the borrower’s  credit report information is accurate, but he knows what he did wrong and wants to work in order to improve it, he can thus make an action plan and can then see how that plan impacts his credit scores over time. He can even get tips on what are problem areas may be.

  1. Build a Strong Credit Age

If the borrower has a short credit history, there’s not a whole lot which the borrower can do quickly here in order to improve his credit. He can, however, try to piggyback onto a friend or a  family member’s credit card with a long history of the  on-time payments by having them add him  as an authorized user, but he  may, however,  struggle  in order  to find someone willing to do so since they would be responsible for any charges which the borrower make.

  1. Clear Up Any Collection Accounts

Borrower should Contact the debt collector listed on his  credit report in order to see if they’d be willing to stop reporting the debt to the credit bureaus in exchange for the full payment. This however technically violates some of the collectors’ agreements with the credit bureaus, so it may thus  be a non-starter, but it however never hurts to try.

  1. Don’t Let Old Mistakes Unfairly Haunt You

If the borrower has filed for bankruptcy, gone into the foreclosure or has suffered through a short sale, he may be wondering when would the credit score misery ends. How long would it really take in order to get out of the credit score hole which the borrower is in? For all of these mistakes, the  credit score thus takes the biggest hit when it first hits the  credit report, but its impact would, however,  lessen over time and then eventually that account would  disappear from the  credit report due to the federal laws that however  limit the amount of time it can impact the borrower.

  1. Get a Credit Card

If the borrower has never had a credit card before, his scores may, however, be suffering because of that account mix factor. If the borrower has a fair, good or excellent credit score, there are however many credit card options out there for the borrower. If he has a poor or bad credit score, then he  Just needs to make sure that he makes on-time payments — a new credit card account with a bad payment history would thus hurt the borrower and would not help him to improve the credit scores.

  1. Open a Secured Credit Card

A secured credit card is thus a type of credit card where the borrower makes  a deposit into a checking account that “secures” the line of credit the bank or the lender which is extending to the borrower.

  1. Fix Your Credit Utilization Ratio

If the borrower’s credit card balances every month are thus more than 30% of his limits, the borrower’s  score is suffering, even if he’s  paying off his balances in full every month by the payment due date. That’s because his statement balance is most likely what’s being reported to the credit bureaus. So, the borrower is required to keep an eye on those balances and then consider pre-paying some of the balance if he knows he’ll be above that 30% mark this month.

This article has been contributed by Simmi Setia, Content Writer at LegalRaasta, an online portal for GST software, GST Return Filing, gst registration.

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