Having a good credit record is a huge benefit to have, especially if you are planning on applying for credit for a big purchase like a house, car or even a personal loan. Lenders will review your credit score and get a copy of your credit report. So how can you improve your chances of being approved?
We all know how tough finances can be at times, especially with so many price increases coming into effect. But that doesn’t mean that you should neglect your credit profile; in fact, now is the perfect time to make sure that your credit record remains healthy, and continues to improve over time. Your credit score gives an indication to potential creditors on how you handle your credit, which will have a big influence on how much credit – if any – you quality for.
Boosting the health of your credit score should always be a priority. If creditors think that you’ll be able to effectively handle your responsibilities and pay them back on time, it can help you to qualify for credit at various financial institutions. Here are a few great ways to improve your chances of getting credit.
If you have a bad credit score, then it's highly unlikely that you will get a loan. Get your credit score first and see where you can improve.
Applying For Too Much Credit
One of the main flags that comes up when reviewing your report is the amount of credit applications you have applied for in a short space of time. For example opening 3 or 4 in a short space of time can signal that you could be in financial trouble. Rather apply for form of credit, and wait to see if you have been successful.
Something else that you should be aware of, when you co-sign to help someone get a loan, that debt will appear on your credit report.
Always Pay on Time
One of the most important things you can do to improve your credit record is to pay on time. Keep in mind that your payment history makes up around 35 percent of your total credit score. If you have a lot of payments to keep track of, you can consider setting up debit orders to make sure they will go through.
You can also consider paying more than the monthly minimum on all your accounts, as this shows that you can effectively handle the amount of debt you have. Lenders like to see that you are paying more than minimum amount. In terms of businesses, if you pay only the monthly minimum it might be a sign that your business is in trouble, and this may in turn negatively influence your chances of getting credit in the near future.
Look Out for Inaccuracies
Make it a habit to check your own credit record every few months, so that you can pick up on any inconsistencies as soon as possible. Mistakes can happen, but if a creditor has submitted incorrect details about your credit profile, you should have this corrected as soon as possible. Also keep in mind that identity theft is not as uncommon as you think, so make sure that your personal information is accurate.
Consider Your Debt Ratio
Your debt ratio refers to the amount of debt you have, in relation to your assets. Your debt ratio will also make up a certain percentage of your overall credit score; you can take advantage of this by paying off the debt with the highest interest rates first, so that your debt can be reduced consistently. This will give you a better debt ratio too, thereby improving your overall credit score.
Manage Your Credit Cards Effectively
The way you manage your credit cards is a good indication of how you will handle your debt in general, so always ensure that you make regular payments on your credit cards, as often as possible. Try to keep your credit card balances as low as possible, so that potential creditors can see that you handle credit responsibly, especially when it comes to payments.
Maintain a Balance
Just as too much debt can be hard on you, so too can too little. Try to maintain a good credit balance, so that you have just enough debt to manage effectively, while being able to show that you can handle your debt and make payments on time. You have to show that you are responsible when managing credit, and that you are not over-indebted at any point.
Your credit history is a very accurate way of assessing how you handle credit, which is why a good credit record should be a priority for you. Don’t apply for too much credit, but always handle the debt you have effectively by always paying on time. The better you manage your debt, the more your credit profile will improve, and that will pave the way for you to improve your chances of getting credit.
Final note; “ Your credit report is a detailed list of your credit history, consisting of information provided by lenders that have extended credit to you.”