What Exactly Is a Credit Score?
A credit score is a number that usually ranges from 300 to 850, which reflects a consumer’s creditworthiness. The higher the score, the better the credit, cash management, and income that individual has, and the more attractive a borrower appears to potential lenders. Debt has always a negative undertone in all financial transactions, but paid on time debt can help your credit history.
A credit score is determined by credit history, including the number of open accounts, total amounts of debt, repayment history, and other factors. Lenders use credit ratings to measure the likelihood that a borrower can repay loans on time.
FICO Credit Score And Debt
The Fair Isaac Corporation, also known as FICO, developed the credit score model used by financial institutions. Although there are other credit-scoring systems, the FICO score is by far the most widely used. Individuals’ credit scores can be improved by repaying loans on time and holding debt to a minimum.
Many important factors will influence your overall financial health. One of the most important of all is your credit score. Those who have a good credit score will be more likely to qualify for the best interest rates available on mortgages and other debt forms. While a credit score can take a long time to build, there are ways that people can improve their score quickly. There are four tricks in particular that anyone could follow that could help them to improve their credit score fast.
Have Inaccurate Information Removed
People can find that their credit scores have been negatively affected if there is inaccurate and harmful information on their credit report. If there is an account on your credit report that does not belong to you and reflects past due balances, it could indicate identity theft and fraud. Unfortunately, this negative information could drastically reduce your credit score and continue to affect it until it has been removed.
If you notice this on your credit report, the first thing you should do is contact the individual creditors about it. Most creditors will have a process for managing identity theft reports. While the timeline can vary, if you provide all necessary documentation and contest the claim, you could have it removed from your report in as little as 30 days. Once the information has been entirely removed, you will see an immediate and significant improvement to your credit score.
Pay Down Credit Card Balance
Many factors will influence your overall credit score. The most significant factor that affects your credit score is your history of making payments to creditors on time. If you have been late or not fulfilling your payments in the past, it can take years for these past due payments to roll off your report.
The second most significant factor that can influence your credit score is your credit utilization rate. This is defined as your current outstanding balance compared to the total credit lines that you have available to you. Generally, if your available credit balances exceed 25% of your availability at any given time, your score will be impacted. Your score will continue to be affected more and more the higher the utilization rate is.
Fortunately, those that have scores impacted by their high utilization rate can see a dramatic improvement in their score by simply paying down their balances. As this is a real-time measurement instead of a historical average, paying down your balances will result in a big jump in your score in as little as 30 days.
Increase Credit Card Limits
While paying down your high-interest credit card balances is a good idea, you can also reduce your credit utilization percentage by increasing your credit limits on your current accounts on time and in good standing. If you do not have the liquidity to pay down your balances, calling your creditors to request a limit increase is a great option.
Have Positive Information Added
While negative information on a credit report can damage your score, having positive information can significantly enhance and benefit your score. Most creditors who provide you with a credit card, loan, or other financing option will automatically report your information to the three major credit bureaus after all the payment cycles are due.
However, there is always a chance that it will not be reported by mistake or due to a creditor’s processes. If you notice that some of your accounts are not on your credit report, you should improve your credit score by contacting the creditors to see if your information could be reported. Once the entire history of the account is reported, it will significantly improve your overall score.
Having a good credit score is vital, and it can have a significant impact on your ability to buy a home or car, lease an apartment or even qualify for specific jobs. While a credit score is a long-term indication of your ability to manage credit properly, four tricks can be followed that will help you to improve your credit score quickly.