When applying for auto, business or home loans, your credit score plays a large role in your purchase power.
Many people use a loan for major purchases in their life. Financing can grant you access to the home of your dreams, your first car or even leveraged capital to start a business venture you've been considering. Furthermore, a higher score can increase the size of the loan you're qualified for and improve the terms, which can allow you to spring for a more expensive Victorian house with an updated kitchen or a luxury sedan with remote start rather than an economy compact.
Here are five tips for improving your credit score:
- Pay down your balances. One factor that affects your credit rating is how much revolving credit you have compared to your total outstanding debts. This is typically expressed as a percentage, and higher percentages are more favorable to your credit score. Of course, the only way to increase your ratio is to make payments on your outstanding balances. While it may not be feasible to completely pay off auto loans or student debt, you can work to reduce the balance on credit cards.
- Get old blemishes removed from your credit report. Although it may have been a while since your last battle with a credit card company over erroneous charges, debt sent to collections can still hurt your score. Luckily, you can contact the credit reporting bureaus and dispute old negative marks on your credit history.
- Check for errors. While reviewing your credit report, which you can get for free once a year from each of the three major credit reporting agencies, look for errors. If any information is amiss, such as incorrect figures for your real estate loans or late payment charges, contact the report's originator and request a correction.
- Make your payments on time. Even for small balances, make sure you're making payments when they're due.
- Don't apply for new credit or close accounts. Each credit inquiry made by a lender affects your credit score, so don't apply for new lines of credit or loans. In regard to your current credit, don't close any accounts. When you are ready to apply for auto loans or mortgages, lenders want to see that you have a lot of revolving credit, and closing accounts lowers your percentage of available credit.
Keep in mind that your credit score won't improve immediately. However, with a few months of diligence, you can have a better credit rating.
For more information about smart ways to manage your finances, contact Landmark Bank.
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