How Can I Improve My Credit Score?

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How Can I Improve My Credit Score?

Getting a home loan requires the best rating because it involves significant amounts of money. If you have not made any missteps in the past, you probably have a good chance of getting a mortgage at an attractive rate. But with a poor credit history, it is hard to expect that you will be trusted. You need to take steps to improve your reputation.

What Affects Your Credit Score?

Many different parameters can be used to calculate a credit rating: gender, age, education, number of dependents, property ownership, the credit history (large loans previously paid, comparable in amount and term to the newly received, frequency and amount of overdue payments on repaid or existing obligations, etc.). From the whole list of parameters, influencing the credit rating the information from the credit history is the most important, and in it, first of all, the overdue payments.

The presence of a loan from a microfinance institution can be an indication that in the past the client had problems getting loans from banks. The combination of arrears in banks and loans from microfinance organizations is reflected in the credit rating as a negative risk factor.

Availability of credit cards and installment cards is a double-edged sword. If a consumer uses the cards regularly and does not default, his or her credit history improves. It may also indicate that he or she is financially literate.

At the same time, repayment of card loans with minimal payments can be seen as evidence of insufficient income. High credit card utilization can also be a negative factor, when, for example, with a $10,000 limit, $9,500 is constantly used.

Early loan repayment usually has a positive effect on scoring. It can indicate an increase in the borrower’s ability to pay and thus a decrease in the risk of defaulting on a loan. As a result, the bank may offer the client a more favorable interest rate in the future. However, there is no absolute correlation between early repayment and a better mortgage offer.

Simple Tricks to Improve Your Credit Score

Traditionally, lenders take into consideration a relatively recent credit history. Most analyze past-due debt for the 5 years preceding the new application. In other words, if nothing is done after a repaid or charged-off delinquency, the scoring model will likely normalize on its own over the years. However, you should keep in mind that some scoring models analyze credit history over a longer period.

Special programs can be used to restore your credit rating to normal values. The idea is to get a small, short-term loan and repay it on time. This method would increase your scoring to a level that would allow you to qualify for collateral loans from a number of banks working with clients who have missed payments in the past, within 2-3 years.

The main recommendation to everyone is to check your credit history regularly, especially since it can now be done for free at credit bureaus Equifax, TransUnion, and Experian once a year. If you find any significant mistakes, you should correct them as soon as possible. Significant errors include an absence of known or excessive loans, a note about overdue payments if there were no such. Technical errors in the address of registration or residence are not of any fundamental importance and have no effect on the credit score.

Should you have any questions please do not hesitate to contact us and we will do our best to help you and advise how to improve your credit score and get an optimal mortgage available for you!


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