Increasing Your Credit Score: How To Improve Your Credit Rating

Posted by Rana & filed under General Debt & Loan Consolidation Information.

Millions of Americans in the United States have a less than perfect credit rating, which is why there are so many consumers out there who are searching for ways to raise their credit score. Why is credit score repair so important? A consumer’s credit rating weighs heavily on his/her ability to obtain new loans, mortgages, credit cards and more in the future.

Your credit score is usually a number between 300 and 850 and if you have a low rating, you pose a higher risk for defaulting on a loan to potential lenders. Additionally, a poor credit score often means paying higher interest rates. On the other hand, a higher credit score lets lenders know that you aren’t likely to default on your loan payments. Essentially, the credit rating on your report is the determining factor when it comes to lenders, landlords, insurance companies and others’ decision of whether or not to conduct business with you.

What Do Lenders Look For?

In terms of computing your credit score for loan purposes, lenders tend to focus on five sections of your credit report. They include:

Past payment history Current outstanding credit debt How long you have had credit Types of credit you have qualified for and received Any new credit you have applied for

If you are lacking in any one or more of these areas, you can improve your report by increasing your credit rating.

The Road to Credit Score Repair

The road to raising your credit score begins with your credit report and the good news is that you can usually access your report online at no cost. Once you obtain your credit report, you will need go through it in it’s entirely and search for any inaccuracies that may exist. If you do come across any information that is incorrect, you should contact your creditors immediately by writing a letter that explains the inconsistencies found on your report. It would also help your cause to attach any supporting documentation which can justify the claims made in your letter.

So what happens next? Well, once the credit reporting agency receives your letter, they have one month to investigate your claim. As for coming to a resolution, the reporting agency can come to one of two decisions. First, they can decide that your claims are completely genuine and change the misinformation on your credit report as well as send you an updated version. Second, they can conclude that the claims you made are false and therefore leave your credit report exactly the same.

Aside from removing misinformation on your credit report, you can also begin to pay off the higher balances you owe in order to raise your credit score. If you have a high balance, it only serves to significantly lower your credit rating. Why? Because it greatly affects your debt ratio; the amount you owe compared to the amount of your total available credit. In addition, if you have more than one account with a high balance, you can pay off one every month and work your way down in an effort to increase your credit score.

Another way to win the race of increasing your credit score is to stop being late on your payments. If you have any bills that are past-due, it’s best to pay them off right away and keep them as current as possible. There really is no excuse to get behind on your payments. If you have certain bills that you know you will have difficulty in paying on time, you can contact that particular creditor in advance and attempt to negotiate a payment plan. This way, you can avoid any negative information from being displayed on your credit report.

The most effective and obvious way to raise your credit score is to eliminate debt all together, which is definitely not an easy thing to do. However, if you stay on top of your finances and open up new accounts sparingly, you should eventually be able to increase your credit rating.

Comments are closed.