The top lenders use FICO scores to determine creditworthiness, and they are determined by five factors:- The most important factors in determining a credit score are payment history, your credit usage, the age of your credit account, and your mix of new and old inquiries.
The best way to get the most out of your credit limit is to keep a 30% or less utilization ratio.
If you are in need of a credit card, then you should definitely check out recent post about improving your credit score. I’ve been using the 3 credit reporting companies (Equifax, Experian, and TransUnion) for years and have had to pay their annual fees multiple times for their services.
Are you trying to raise your credit scores fast?
Credit scores are a big deal. It’s important that you do your research before taking out a loan, especially if you’re purchasing something brand new. As someone who is not always the most informed consumer, I’m always trying to educate myself on how to improve my credit score. In this post, I’ll be focusing on the best way to improve your credit score, and hopefully make it a little easier for you to do so.
8 strategies for getting a better credit score
1. Check Your Credit Reports
Did you know your credit reports can affect your life? I don’t mean the credit reports on your credit card statements (although that’s a pretty big deal), I mean the ones about your finances. And if you’re not paying attention, they can be a big problem. They may not show up in your credit report, but they do affect how lenders see you. They can affect how much you can borrow, and thus how much you pay in interest.
2. Stop Paying Bill Late
FICO is the most common credit score used by lenders and it accounts for 90% of top scores.
• Payment history (35%)
• Credit usage (30%)
• Age of credit accounts (15%)
• Credit mix (10%)
• New credit inquiries (10%)
At the end of each month, you will almost certainly have a large pile of bills to pay. If you’ve been paying your bills on time, you probably don’t have any need to worry about overpaying for a few months. But if you can’t keep up with your bills — because of a delay, for example — or if you pay late, you can end up in trouble with the government.
To improve your credit score, it is important to avoid late payments and not be carried over to the next due date.
• Creating a paper or digital filing system for monthly bills
• Setting bills and other important reminders
• Automatically paying your bills from your bank account
3. Aim for 30% or less of Credit Utilization
A credit utilization charge, also called a negative amortization charge, is an expense that is charged when a borrower’s debt service exceeds its available credit. A credit utilization ratio is the percentage of the total debt service costs that are funded by available credit. The higher the ratio, the more money lenders must pay out in interest and principal to pay off debt.
Keeping your credit utilization to a manageable level is as easy as making sure you pay your credit card balances in full each month. If you have no other option, keep your credit utilization (total outstanding debt) at 30% or less of your total credit limit. Many homeowners get started with a budget of 10% or less and work their way up to a more manageable amount.
