There are many approaches to accomplish your best credit scores. Having higher credit scores will not only benefit you when applying for credit but they are also considered by insurance companies and even potential employers. Unfavorable terms or even a job denial may be the result of low credit scores. Follow these simple steps to begin improving your situation now.
When applying for credit it is important to understand what is on you credit report. There is more to it than just your FICO score. FICO is only one part of your combined credit score and is issued by the Fair Isaac Corporation, a credit repository. The other two primary repositories are Experian and Trans Union. The information contained in the reports may vary from one repository to another so it is important to compare them for accuracy. When assessing a client applying for credit a lender will usually take the average of the three scores. The higher the scores the better programs that will be available resulting in lower rates and fees.
Probably the most important action a person can take is to make timely payments on any outstanding credit obligations.Lenders see a low credit score as a red flag that either you have had credit issues in the past or that you may not be able to meet your future obligations. Late payments result in an immediate and significant drop in your credit scores. a second missed payment will be even more substantial. Collection efforts, foreclosures and bankruptcies not only have a significant negative effect but they also stay on your credit reports for much longer, typically 7 to 10 years. Most revolving debt drops off after just two years of on time payments.
Negative credit events have an immediate negative impact on credit scores while trying to improve credit scores takes some time. The various credit repositories each have their own algorithm they employ to determine your score. The Best credit scores will require a strong background of responsible borrowing over time and maintaining various types of credit. A balance of credit covering revolving debt, auto loans and mortgage payments and a history of on time payments will certainly lead to favorable scores.
Even though your available credit may be high it is advisable to only use a small portion of it on a regular basis. Generally 20 to 30 percent is a good range to stay in. It also leaves a buffer if you face some financial difficulty or unforeseen expense. Be sure to pay more than the minimum payment each month on revolving debt, it saves money on interest and pays the debt down faster.
When trying to improve credit scores begin with pulling the credit reports from the three bureaus. The U.S. government provides that each year an individual may pull from all three bureaus for free. One effective strategy is to pull credit from one bureau at a time so after making corrections or changes there are two more agencies to pull from for free. Compare the reports and work on the next issues.
If ever a consumer sees trouble with paying their obligations the best approach is to contact the lender immediately. If payments have been timely in the past the consumer has a better chance of reduced fees or interest. this may be enough savings to stay on track. In other cases ask for forbearance or forgiveness of the debt for a period of time. some lenders allow for this from time to time by extending the terms of the loan and allowing for even two or three missed payments without resulting in negative credit reporting.
Understanding how to achieve you best credit score is imperative. Once these strategies are accomplished you have probably created new patterns of behavior that will make it easier to maintain your credit scores in the future.
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