Your FICO credit score is one of the things that you must consider when applying for a loan. It is one of the essential factors that your lenders would check to ensure if you are qualified or worthy to be trusted with the loan. Having a good to an excellent credit score with a numerical value of 740 to 800+ comes with many advantages.
These advantages include having great terms and availability on loan products, having access to the best credit cards, having more housing options, and many others. Thus, you need to work your way in boosting or improving your FICO score, especially if you land a poor to fair credit score. But what are the ways to improve it? Here are some doable and helpful tips:
Review Your Credit Report For Errors
FICO score is one of the brands or models of credit scores that lenders used to evaluate and determine whether you are qualified to be approved of the amount of the loan you are applying for. It is a three-digit number, particularly ranging from 300 to 850 numerical scores, representing your credit standing.
These numbers are divided into categories, with 300 to 579 classified as poor credit, 580 to 669 as a fair credit, 670 to 739 as good credit, 740 to 799 as very good credit, and 800 to 850 as excellent credit. To know more about these categories of credit scores, you may visit Crediful online for additional information.
These FICO scores are based on the summary of financial information provided in one’s credit report. Thus, it would be better to check your credit report regularly to ensure that all the financial information included in it is updated and accurate. Look for errors, and if there are any, take some precautionary efforts and steps to correct them as these errors can negatively affect your credit score and standing.
Pay Your Bills On Time
There are five vital factors or components that contribute to your credit score. These factors include your credit history (35%), your credit utilization rate (30%), your inquiries and new credit (10%), the diversification of your credit (10%), and lastly, the length of your credit history that reflects 15% of your credit score.
Since 35% of your credit score is based on your payment history, you must ensure to pay your bills, such as your credit card bills, utility bills, and phone bills, on time. To help you get reminded of the date and time you are supposed to pay your bills, you may use an online calendar reminder tool or phone application that allows you to set the alarm or notification every month.
Avoid Multiple Hard Inquiries
A hard inquiry is one of the main types of credit inquiry that occurs when you apply for new credit or loan that allows your lenders to check your credit file as a way to evaluate your creditworthiness. Having too many hard inquiries reflected on your credit file may be viewed by other lenders that you are facing bankruptcy or financial difficulties.
Thus, if you are heading to boost your credit score for future major loans, avoid having too many hard inquiries. Or better yet, avoid opening a new credit line until you fully repaid your remaining exhausting debts.
Decrease Your Credit Utilization
Credit utilization is another important factor that has a great significant impact on your credit score. It refers to the ratio or percentage between the amount you spent using your credit card compared to its limit. Calculating your credit utilization is easy. Just divide your credit card’s balance to your credit card limit and multiply it by 100 to get the percentage. The lower your credit utilization percentage, the better.
Apply For A Loan Only As Needed
Applying for a loan should be purposive. Don’t apply for a loan and open a new line of credit, only for the sake of having a credit mix. Although having a credit mix proves that you can pay your debts on time, it cannot improve your credit score. To improve your credit score, it would be best to apply for a loan only as needed.
Before you decide to apply for a new loan, reflect first within yourself if you need the money and what purpose it should serve if you get approved. The amount of your loan should also be reasonable. Borrow only a considerable amount to avoid overspending.
It is not only your credit score that most lenders check and evaluate when you apply for a loan. There are many others, including your debt-to-income ratio and your income and employment history. However, to ensure that you get approved for your loan application in the future, you must not risk having a poor credit score. So, taking some vital steps to improve your credit score is a must.