Factors That Credit Card Companies Look at When Evaluating an Application
Credit scores are three-digit numbers that lenders use to assess your likelihood of paying back a loan in time. If you have a high credit score, qualifying for loans with favorable terms is much easier. Most individuals consider having multiple credit cards a good way of improving their credit score, but this is not usually the case. If you don't pay all your credit card loans on time, it can adversely affect your overall credit score.
Many financial institutions use the FICO system to calculate credit scores, which range between 300 to 850. Before trying to improve your credit score, bear in mind that it's a process which requires patience. Here are several ways to improve your credit score.
1. Check your credit reports for mistakes It is essential to have your credit report reviewed for errors (e.g. an account appears as 'open' when it is actually 'closed'), as these play a huge role in lowering your credit score if not identified on time. By checking your report regularly, you'll be able to spot and fix any mistakes before they can do too much damage to your rating.
2. Paying bills on time Paying your bills on time is the most effective way of raising your credit score. Paid bills show that you are responsible, making you a reliable loaner. A financial institution is likely to dismiss your request for a loan if you have several unpaid loans or late payments. Unfulfilled payments suggest you are a risk to the loaning company.
3. Avoid closing unused credit cards Closing a credit card increases your utilization ratio, therefore, lowering your credit score. A high utilization ratio results in low points, which adversely affect your credit score. You can quickly increase points by ensuring your utilization ratio is 30% or less. Utilization ratios vary from one financial institution to the other, so be sure to do your research. Hire us at Finance Finder Pro! Always ensure you have a good understanding of a firm's payment rates before using your credit card.
Finance Finder Pro can help you learn more about your credit score, simply contact us today to learn more about our services.