Manage your credit score well to qualify for low-interest loans. Increasing your score to 800 will do you good financially due to flexible credit terms availed to you.
It requires effort and discipline for a borrower to increase their credit score for even ten points. 800 is a near perfect credit score that could open multiple options for you to get a loan. You pay a lower interest rate with a higher credit score. Getting to 800 is a tough task, but with the right financial tacticredit score and strategies, it can be achieved. The suggestions below can assist in your effort to attain a rating of 800.
Dispute even the slightest error
You are entitled to a free copy of your credit score annually from the three main credit reference agencies (Experian, Equifax, and the TransUnion). Review the reports carefully and ensure that all accounts recorded belong to you, no payment is omitted or underreported, and h credit limits are correctly reported. File disputes with the credit bureau if you note mistakes in your report.
Prioritize your credit payments
If you have multiple credit lines, ensure you give priority to those with the highest balances and lower credit limit. It may be easier to pay the smaller balances, but if you want to increase your rating quickly start with the one that has a lower limit. It is because a lower credit limit means your credit utilization ratio is higher reducing your score. Credit lines with lower limits do more damage to your score especially when you utilize a higher credit amount.
Avoid delaying payments and defaulting
Paying your bills promptly increases your credit score significantly. To maintain a higher rating, you can pay you credit card balances earlier before you are issued with the formal bill. It even boosts the confidence of or credit card provider in you. Your payment plan must be robust to ensure you reduce the risk of defaulting, which damages your credit rating.
Diversify your credit
Having a good mix of various credit types can increase your score towards 800. Lenders prefer borrowers who use different types of credit while handling several accounts simultaneously. You can add a small installment loan to go with your credit card boosts your credit score by about 30 points.
What is a credit score
A credit score is needed for you to be able to get a loan or credit. The reason behind this is because it will help financial institutions to determine your creditworthiness. They will also see every loan that you made and the payment history that you have. Find out more about it by reading the information below.
Credit scores are calculated based on the proprietary algorithm. This will include the person's outstanding debts, payment history, and the length of the individual's credit history.
Credit scores can range from 300 to 850. The higher the individual's score, the lower the risk. People who have lower credit scores are considered high risk, which will make lending companies ask for more requirements.
About Fico scores
Fair Isaac Corporation is the one who established FICO, and it is one of the most commonly used credit scoring systems today.
According to FICO, 90% of the most reputable and respected lenders today are making decisions according to this kind of credit scoring system. Get to know more about Fico scores by reading the information below.
How are credit scores calculated?
The weight of each of the five categories are; 30% of amount owned, 10% is for the new credit, 15% accounts for the length of credit history, 10% is the credit mix and the last 35% accounts for the person's payment history.
The FICO score takes into consideration positive as well as negative aspects of the credit report. The percentage or the weight of any of the categories mentioned above may differ from a person to another depending upon the information available in the credit report.
The FICO score takes all of the information from your credit report. However, the banks or any other lending institution might look at your income, type of credit and employment history when you apply for a loan or mortgage.
Once a certain lender asks for a client's credit report, they can also ask for the Fico score. Other sources say that your Fico score will include 35% of your payment history, 30% of your credit utilization, and 15% as to how long have you been borrowing.
Explanation of credit score ranges
It is important to know the category that you fall into when it comes to credit score for you to be aware. The range of a credit score can go from 300 to 850. Always remember that the higher your score, the higher the chances of you to qualify for a loan. There will also be instances where a financing company is okay with 650 scores, while the other is fine with a 750 score. It will all depend on the lender itself.
A lender or a bank will check your credit score if you qualify for the application that you are requesting. Here are some of the credit score ranges that you should know.
Bad credit score
People with a credit score below 579 is known as high risks. Foreclosures, poor payment history, and bankruptcies are the reasons why people fall into this category.
Good credit score
A good credit score ranges from 680 to 719. People with this credit score can expect approvals and interest rates that are better.
A very good credit score ranges from 720 to 799. People with this credit score is known to be small risks, and they often get loan amounts that are higher than usual.
An excellent score ranges from 800 and above. Financial freedom is expected to people with this score.
Other things you can do to improve your credit score
The credit score ranges from 300 (the lowest credit score possible) to as high as 850 (the highest credit score possible). Higher you credit score, greater are your chances of getting your loan or credit request accepted quickly.
However, if you are facing issues with your low credit score, following are some of the tips or techniques that you can use to improve your credit score:
You should start by minimizing your total debt. The increase in your total debt value is going to affect your credit score negatively.
You should also be very careful with your bills and other credit payments. If you pay them on time, this will gradually improve your credit score.Have a closer look at your credit balances. You do not want to cross the credit limits because they deteriorate your credit score.