Are you thinking of purchasing a house? Are you in need of a new vehicle? If so, you might need to apply for a loan. Buying a car or a house in cash can be expensive, and most people do not have the money to do so. Therefore, you might need to work with a lender. The lender will likely check your credit score before they decide to give you a loan. If you want to get the lowest interest rate possible, you need to maximize your credit score. Furthermore, if your score is too low, you might be denied outright. What can you do to increase your credit score?
Pay Your Bills on Time
If you want to increase your credit score, the most important thing you need to do is pay your bills on time. Bills include your phone, cable, internet, electricity, water, and gas. If you pay late, the company could report you to the major credit bureaus. Late and missed payments can lower your credit score. On the other hand, paying on time can maximize your score.
Pay Down More of Your Existing Debt
The lender will also take your debt-to-income ratio into account. Having too much debt could reduce your credit score, making it harder for you to qualify for a loan. For example, having large student loans doesn’t look good to the credit reporting agencies. Before applying for a new loan, you need to pay down more of your existing debt.
Lengthen Your Credit History
The longer your credit history is, the higher your credit score will be. If your credit history is too short, there might not be enough information for the major credit bureaus to work with. As a result, your credit score may be low even if you are financially stable. Taking out a credit card at a young age is good practice to get a head start on your credit history. If you have children, you can co-sign for them to help them build credit.
Correct Any Inaccuracies on Your Credit Report
Check your credit report once per year — you get a free one from the major bureaus every year. There may be lots of people with the same name, and someone else’s financial issues could end up on your credit report. If you don’t check yours before applying for a loan, it might be too late to correct the mistakes, and you could be stuck with a bad score.
Always Check Your Credit Score Before Applying for a Loan
These are a few of the easiest ways you can increase your credit reputation. It may take some time to raise your score, but a higher number could make it easier for you to apply for a mortgage or car loan. According to Equifax, a good credit score starts at 670. If you can reach that or better, you’ll be able to qualify for improved loan terms and reduce your interest rate. This could make your dream house more affordable.