Before you get a loan, banks and investment houses usually take a peek on your credit report or your credit score. Your credit score will determine if you are the type of person that lenders would want to lend their money to. Your credit report reflects your credit history, if you are able to meet your credit payments on time and your overall credit worthiness.
Having an impressive credit standing will definitely make your application shine among the rest. Do you have a not-so-attractive credit record? Then read along and pick up these tips on how to improve your credit score before getting a loan.
Double check your credit report
You need to double check and fix errors in your credit report. For an insight on how to check your credit reports, you can go to www.annualcreditreport.com to get a free credit report on an annual basis. Three different credit reports from three different bureaus are available through this site. Make sure that you check all three and fix the errors if you find any. Different reports will result to different credit scores; there might be a huge disparity among the three if there is an error.
This is how lenders assess your three credit reports: they usually take the middle score and use it as their basis. Before you apply for a loan, check your credit reports and if you find an error, report it to your lender as soon as possible. It usually takes 30 days for credit bureaus to fix the errors, but lenders work faster. They usually fix errors 36 to 72 hours after your error report.
Keep track of your bill due dates
Your ability to pay all your bills on time will reflect positively on your credit report. Usually, one-third of your credit report is taken from your payment history. If your budget won’t allow you to pay the whole amount of the bill on time, then at least make minimum payments before the due date. Your credit score will not be dependent on the amount of payments that you make but rather on your ability to meet the deadlines. If you still can’t meet the deadline then pay up as soon as possible. Delaying your payments for a long time will only hurt your credit score and increase the interest expenses.
Don’t max out your credit cards
Lenders are very wary if you have a history of maximizing your credit balance. The ideal is for you to keep your loan balances equal to 25% of your credit limit. The lower your loan balance is the better. Lenders will look at the amount that you charge to your credit cards, even if you pay the balance every month.
Keep your old accounts
Your credit score is also dependent on the age of your oldest credit card and the average age of all your credit cards. Closing old accounts will also affect your total credit limit, which will make you prone to maximizing your available credit. If you have no choice but to close your old accounts, do it individually every few months. But remember to not close any accounts within 6 months of your loan application.
Just follow these steps and you’ll be assured of an attractive credit score that will surely make the lenders approve your loan application.
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