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How To Recover Your Credit Score

Recover Your Credit Score

how-to-recover-your-credit-score

Credit score plays a vital role in your loan application process and may lower the chances of loan approval. It crafts your financial health in the eyes of lenders. Hence, it influences your loan credibility; the better your credit score, the easier you will get a loan. It showcases to the lenders how responsible you are for using credits.

To improve their credit information report, some people opt for a credit repair company. It isn’t the best solution for anybody because it’s a lifetime process. You must know how to improve your credit score rather than paying a penny to the repairing companies. Here are some tips that you can follow to improve your scores.

What Is a Credit Score?

It is a numeric figure that represents a customer’s credibility and lies between 300-850. This value indicates how well or low you can pay the lenders. So if you have a higher score, you will be able to get a loan effortlessly, or you might get it at the lowest interest rates. Lenders predict through this credit score whether a customer might repay the loan in time or not.

The 300 score represents the poor credit score; the 850 score represents the excellent credit score. Higher scores indicate better credit history, low credit use, on-time payments with a long history report. The lower scores introduce bad credit histories with late payment and overuse of credit. Lenders require higher scores above 720 and consider scores below 630 as bad scores.

Factors Influencing Your Credit Scores:

Many factors are involved in affecting your scores. Let’s discuss some of the common factors here:

1. Payment History (35% of Credit Score):

A record of all on-time payments and late or missed payments; or shows whether you pay your duties on time.

So you should consider these points whenever you make payments:

Are you paying on time?

Are you paying the entire balance?

2. Total Credit Usage (30%):

There is a 30% credit usage limit allowed to every single person. If any person crosses this limit, that person would be turned into a high risk and penalized.

However, if the person uses less than 30% of credit usage, then that person would be considered a safe borrower. So always calculate what is your credit limit and how much you are using your credits?

3. Age and Length of Credit History (15%):

Longer credit histories reflect less risk, and the longer you have an account, the more chances lenders to make a loan.

The lenders like long credit history and see how old your credit accounts are.

4. Credit Mix (10%):

It doesn’t count much in overall figures. It shows if a person has more than one installment, like car loans or mortgage loans that involve credit cards.

It reflects the types of credit accounts a person is using.

5. New Credit (10%):

It shows how many new accounts a person has. The full detail of a person, like how many accounts a person had in the past? How many new credit accounts has he been applying for recently? Request for many credit accounts in a short time indicates risk and a low score.


How To Improve Your Credit Score?

If you have low scores, then you probably would like to improve them. Let’s quickly dive into the steps to improve your scores.

1. Pay Bills on Time:

Remember on-time payment is the key. Pay all your bills on time, set up an automatic payments method. Setting up payment reminders can help you to avoid late due.

To get a noticeable change in your score report, you need to make on-time payments at least for six to eight months. Clear all the dues of any other credit accounts to stable your score.

2. Pay Attention to Credit Utilization:

The most underrated method of improving the scores. If you control your limit of credit expenses, that will help you to rebuild your creditability. If you exceed the limit of 30%, then that would affect your scores. So if you have a credit card limit of $6,000, you shouldn’t exceed $2,000. The lower your credit utilization ratio, the better would be your credit score.

3. Consider a Secured Account:

Consider opening a secured account, like a secured credit card. It will also help you maintain a good credit history which would be valuable for further approval of loans or credit cards.

How do you use your credit account? Whether you pay your monthly bills? Your payment history will help you to create your credit.

4. Ask For Help From Family and Friends:

You can get help from your friends and family. They can help you in a certain way, including:

  • Allow you to become an authorized user of their credit account whose history is already good.
  • You can open a joint account with one of your family or friend.
  • Become a cosigner, so you can get a loan that you might not be capable of getting it.

5. Be Careful With Your New Credits:

Applying for new credit accounts in a short time can affect your scores. It may expand your total credit limit but influences your score.

However, increasing your credit amount can improve your credit ratio, but you need to pay your bills each month. When you apply for a new account, it will appear as a hard inquiry in your report.

Too many hard inquiries in a short time can reflect a negative impact on your history and in the eyes of lenders.

6. Review Your Credit Report:

You need to check your credit report to avoid the error. It can help you to fix any errors that you may found at the right time.

7. Pay More Than Once in a Billing Cycle:

If you can manage to pay down your bills every other week, then make a habit of paying them at a fixed time. It would help you to lower your credit ratio and improve your scores. You only need to set a reminder of paying your bills without a single miss.

8. Do Not Close Unutilized Accounts:

As mentioned above, the age of the credit account matters; the Older the accounts, the longer and better the history. If you still need to close one of your credit accounts, close the newer one.

How Long Does It Take to Polish Your Credit Scores:

It is almost impractical to give an exact time to rebuild your scores. It depends on the number of negative information on your credit account. The longer your negative report, the longer time it would take to make it better.

However, if you have less obstructive information like late payments, constant credit applications in a short time, or maxed-out credit cards, then it would be easier to repair your credit score in less time. It may take at least 3-6 months to get a noticeable variation in your score. It isn’t an overnight process and will take some time to fix the score.


© 2021 Ankita Sharma

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