Why Building Credit Score is Important and How to Increase your Credit Score

Good credit is essential throughout your financial journey. Simply, if you want to have a comfortable life you must have good credit. Establishing good credit is one of the most important things thing you’ll ever do. You wanted to buy a house or car, get insurance, start your own business, applying for a job, or maybe even paying less deposit for utilities.

YOUR CREDIT SCORE

The Credit score is the number used to determines someone’s capability to manage the debt. This will help mortgage lenders decide on how likely you are to pay. Good credit and higher scores have the best chance of being approved for a mortgage and more favorable terms.

Your credit may have can change over time to make payments and creditors provide the information. The scores may vary from month to month depending on the different types. These different types of credit scores exist for various mortgage purposes. According to FICO, they offer specialized scores for financing a vehicle, obtaining a mortgage, and qualifying for a credit card. They are constantly redefining their models to used that can affect your score. The factors of the model include your credit payment history, the amount loaned, credit utilization, length of credit history, and types of credit used.

Credit Payment History – This is made up of your level of responsibility when it comes to paying your credit and mortgage on time. A missed payment can cause someone’s credit score to drop.

Amount Loaned – This includes the money you currently owe across several lending companies including the money that you owe from the credit cards. The bigger the amount you owe, the less likely you get approved for new credit.

Credit Utilization – Whenever you apply for a credit or loan, you get flagged for opening a new line. Therefore, having multiple credit lines can affect your rating.

Length of Credit History – The length of time you had a credit. If you own credit cards, they will average the age of your oldest to the newest card.

Types of Credit – Different types of credit accounts such as credit cards, cash loans, car loans, and mortgage.

The Credit Score model considers what type of loans you are using or what you have used in the past. Lenders like to see that you can handle any different types of loans. Scores range from 300 – 850 points and based on that factors. The higher the score, the better chance of acquiring a loan. Maintaining good credit will surely be rewarded, you can get negotiable interest rates, faster approval, rebates, a loyalty program that you will enjoy.

BUILD AND INCREASE YOUR SCORE

Remember that getting a loan is a big responsibility, so you must do your best to stay on the top and priority to pay them diligently. A bad credit score will record, it will damage you financially and would stop you from acquiring new credit when you most need it.

The question is how can I maintain, build and increase a good credit score. Here are some tips!

  1. Avoid delayed and missed payments.

You can influence your credit score by paying your bills on time. Always remember your due dates or the deadline for your payment. You must show that you are a reliable payer. If you are behind on payments, bring them currently. Late or missed payment appears negative information on your credit score report. You can sign up for automatic payments so that monthly dues can be settled just in time for your deadline.

  1. Stop going over your credit limit

Lenders will be flagged you down for overspending. It can lead to big balances that can hurt your credit score. Ideally, your balance should not exceed 30% of your credit limit. Monitor your credit card balances and keeping track of your spending.

  1. Do not close credit card accounts

Be careful about closing credit card accounts for any reason, especially to the oldest. Closing accounts can affect both your credit utilization ratio and the average age of your account. It can be worth keeping credit card active by making small purchases every month or year. As long as, it will not rack you up to debt.

  1. Settle your existing loan and credit

Before applying for a new loan, you must settle your existing loan and credit. The lenders will take a look at your credit score and it should be clean to get faster approval. At the same time, negotiable interest and rebates.

  1. Build your credit early

Having a strong and long credit history will surely help you build a credit score for the rest of your life. If you have established your good credit standing when you are young, you will be able to buy a car or house earlier and pay less interest and setting yourself in a strong financial position.

Building and increasing your credit score is a long-term- investment and it cannot happen in just a snap. The factors you need to consider for your credit scores will gradually build and continually increase your credibility and enhance financial responsibilities. The best way to improve and build your credit is to do steadily, be responsible every day. A credit score is a good goal to have, especially if you are planning to apply for a loan, mortgage, or major purchases.

Credit can be powerful to achieve your financial goals and dreams. Your credit will define by how you have paid your bills in the past. It is important to know how it works, how to build your credit, and ensure the credit history that works for you.