When it is time to qualify for a loan, you often find out how important a good credit score is. If your numbers are too low, you may not be eligible for the loan altogether, or you may end up paying a higher interest rate. There are many steps you can take to improve your credit score, and many of them are easy to complete.
To begin with, do not cancel or close any credit cards that you are not using. It can be helpful to have older accounts open and in good standing. These seasoned accounts show you have established credit and have had access to it for some time. Another reason not to close any old accounts is to keep your debt to credit ratio low. If you are carrying some debt, but it is spread out over a lot of unused credit, the ratio appears balanced or good.
Pay all of your bills on time. Paying on time is a sign of creditworthiness. Late payments will eventually erode your score. Some things you can do to make sure all of your payments are on time is to set up automatic payments through your bank, utility company, or creditor. This is usually a free service, and it is one way to ensure you are always on time.
Pull your credit score from the credit bureaus. Everyone is entitled to one free credit report from each of the credit bureaus, and there are three bureaus: TransUnion, Equifax, and Experian. Your report can be accessed directly through each company’s website. To begin with, only get one report. Once you receive it, check it for errors. These mistakes could be bringing down your score, and you have the right to challenge them. If you spot a mistake, check the credit bureau’s website that you got the report from and find out what their procedure is to dispute a claim.
Once you have completed the dispute and it is cleared up, check your score in about two months. It can take as long as 30 days for your report to reflect the changes, so you will need to give it some time to correct itself. Once sufficient time has passed, request another report from another bureau to make sure all of them have been appropriately reported to.
Think twice before opening up any more credit cards or loans. If you do not have very many credit accounts, low debt, and a high credit score, it may not hurt your credit to open up another store credit card. On the other hand, if you are trying to raise your points, opening up more credit is probably going to cause the score to drop. Before even applying for any type of loan or credit, decide if the move is going to set your rating back.
As you can see, there are many things you can do to improve your credit for a loan. Some tasks are easy, while others will require paperwork and diligence. The good news is all scores can be raised even if it takes time.