Credit reports are used by loan companies to help determine whether you are at risk and whether you will repay the loan you received. There are some easy steps you can take to improve your credit score, but many of these actions are not supposed to You did.
Note: This article applies to the United States region. While some of the information here is relevant to other jurisdictions, check the laws in your area to ensure the accuracy of this article.
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Step 1. Get your credit report and score from the national credit bureau
The first thing you should do is know where you are now, so you can define your goals. Unlike credit reports, which you receive for free once a year, you have to pay to find out your credit score.
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Make sure you get an actual FICO credit score, as this score is used by most creditors. So far, there are three steps you can take to earn this score: look it up online at Transunion, Equifax or Experian, make your own choices and follow the instructions they give you.
Improve Your Credit Score Step 1Bullet1 - You are considered high risk if your credit score is below 6200.
Step 2. Don't respond to pre-approved credit card offers that you get in the mail
This includes every offer you get from the internet. You might think it's okay to accept it, but the fact is that an easy-to-approve credit card will have a big impact on your score. If one of the national credit bureaus receives a question about you, your score will drop by several points.
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This includes store card accounts; the less you have, the better.
Improve Your Credit Score Step 2Bullet1 - Frequent checking will hurt your score, meaning you should also avoid checking your score compulsively.
Step 3. Avoid jumping from one credit card to another
If you "transfer debt" (a scheme that will have no bad effect on you and don't charge any interest on the balance for a while), don't close your old account. Your credit history looks better at the credit bureaus if you have older accounts. It will look good even if many of those accounts you never use again.
Step 4. Stabilize your credit
There are several ways to make a credit score review look good:
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Buy your own house. Owning your own house is seen as much better than renting it. Although home ownership has made it easier in recent years, there are still many people who can only own their own home by saving regularly and shopping as needed.
Improve Your Credit Score Step 4Bullet1 - Avoid changing addresses frequently. Staying at one address for long periods of time will look better on your credit history than if you move frequently.
- Marry. If two people have very similar credit histories, the married person will have a higher credit score than the single person. This is weird but true!
Step 5. Rely on your age
Age is something you can't change, but in this case older means better! Age is one of the factors assessed by credit credit bureaus to determine credit scores. While you can't age drastically (and neither will you), at least you know that your credit score will automatically improve over time.
Step 6. Pay your bills on time and regularly
This is actually the first thing you should do to improve your credit score. Late payments will make your credit score plummet and you'll be seen as unreliable. From now on, try to pay bills on time. The lion's share of the credit score is taken from your payment history.
Step 7. Reduce the debt-to-credit ratio
The next biggest part of your credit score after credit history is the availability of a credit balance. Strive to maintain a credit balance of about 30 percent or less of the credit limit. This means that if your credit card limit is Rp. 10,000,000, try to have a balance of no less than Rp. 3,000,000.
- Having low debt will help a lot. In other words, if there is a lot of credit available and little debt, this looks better than you seem to have a lot of debt, or have reached your credit card limit.
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If you're going to pay off your credit card in full, consider paying it a day or two before the billing cycle closes (see your total online bill during the day). As such, your charge will show a very small or even negative amount, and this will be reported to the credit rating agency. This will increase your credit score by up to 50 points (the rest cannot be changed).
Improve Your Credit Score Step 7Bullet2
Step 8. File an objection to a 'false' credit report
You usually receive one 'wrong thing' on your credit report each year. Do this consistently, at least as far as credit card companies are concerned. With persistence and patience, you can improve your score over time.
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When reporting errors (inaccuracies or incompleteness) or fraud on your identity, attach all forms of evidence you have, such as canceled checks, stamped invoices, police reports, etc.
Improve Your Credit Score Step 8Bullet1 - Late payments shown on credit reports can hurt your score. Collection, valuation and tax liens will have a big impact. You can negotiate to get rid of this negative information. Look for ways to do this in another article.
- Realize that unlike what you may have heard or read, removing negative information from a credit report is not an easy thing to do. It takes persistence, real facts, and also patience.
Step 9. Note that 'paying off' debt will increase your credit score
Surprisingly, sometimes refinancing and swapping cars that are still on credit can also 'pay' the loan. If you decide to refinance, do so for a lower rate.
Step 10. Stay out of debt
Paying off debt is the first and most important step in improving your credit score.
- Close your credit card once it's paid off. Too many credit cards can hurt you. Keep older credit cards, then close the others.
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Budget, budget, budget. Creating a budget will help you pay off debt, improve credit, and stay out of debt. Even though the credit bureaus can't see your budget, they will see the results of your persistence in budgeting.
Improve Your Credit Score Step 10Bullet2
Step 11. Create different types of credit
A "healthy credit mix" of different types of credit will be recorded better than just one type of credit. As an example:
Let's say there are two people who have a total credit of Rp. 100,000,000 each, and both make debt payments on time. The first person's debt came from just one credit card. The second person's debt comes from credit cards, car payments and cash withdrawal credits. The second person will be judged much better than the first person
Tips
- Maintain your credit score after it improves. With careful planning, your credit score will no longer be bad.
- When you apply for a loan, you can request a copy of the current credit report. They will also usually offer it to you.
Warning
- The Fair and Accurate Credit Transactions Act (FACTA) and the Fair Credit Reporting Act (FCRA) state that you are entitled to an annual credit report free of charge.
- The official website set up by credit reporting agencies to check credit reports is:
- Equifax and Experian allow you to check reports directly from their own websites. TransUnion requires you to register for a 'trial service' which allows you to view the same report for 30 days, but you can cancel this service as soon as you receive your report. Don't forget it and start being billed Rp120,000/month for this service. See the outer link for this. If you visit the official website https://www.annualcreditreport.com/, you don't need to cancel anything.
- Most services that advertise being able to provide free credit reports are scams. They will act as an intermediary between you and credit companies (Experian, Equifax, TransUnion) and then steal your data for later sale to marketing companies.
