Improving Your Credit Score

Improving your Credit Score

Summary: You can always do something in improving your credit score which has become a major deciding factor for most loan and credit approval.

Denied while going for a loan suck; most especially since if you go for a loan, it's because you need the money. While there's nothing to be done about your loan, you can surely do something in improving your credit score -which is the greatest factor in any loan, credit, or mortgage approval. Or just in any scenario involving money for that matter. So what are those factors you can do to improve your credit score?

The Presence (or Absence) of Credit Accounts

Having a number of accounts especially if those accounts have been existing for some time have ways in improving your credit score. The accounts can generally give a more accurate condition of your paying ability. In effect the absence of credit accounts will be a bad mark on your credit score. Say you are new to the credit account area so there's no data to be assessed. Lenders will generally make you a credit risk therefore you are awarded a smaller loan with a high interest rate plus a shorter term. Likewise, a couple too much credit accounts even if you are doing well on all of them will be a bad credit score mark. Lenders will worry that you are spending beyond your means therefore they will see an eminent dark spot on you and will be faster to withdraw their deal than you can convince them.

Your Payment History

This includes all payment transaction within three months. Frankly repayment (plus interest of course) is the bread and butter of lenders and creditors, even with the presence of security. So timely payments always results in improving your credit score, in fact payments have the biggest percentage (35%) in the actual credit score computation.

Generally, lenders won't consider a missed payment once in a while since even the most dedicated borrower inadvertently misses payments once in a while. But missing payments for a consecutive of three can get the impression that the consumer won't be repaying the loan ever again so there would be a decrease in the credit score. And since payment history is 35% of the credit score, expect a huge decrease.

Using the Credit

As a general rule, financial advisors always say that the best credit practice is maintaining a credit balance of 25%. Though lenders openly agree, they also want the credit to be used so that more interest does pile in. Funny thing though that they would consider that having maximized the credit line can spoil your credit score. So, for improving your credit score, try maintaining a 25% credit balance or even just a below 50% credit balance.