How To Improve Credit Rating Score

If you want to get approved for any type of loan, whether it be for a car loan, a personal loan or even a mortgage, you must have a good credit rating.

If you have an average credit rating as a result of being unable to pay back a few loans in the past, you will find it more difficult to obtain credit especially in today’s economic climate.

If you have a bad credit rating, then it will be virtually impossible for you to obtain low interest credit, and your only option will be to look for credit agencies that will give you credit but at an extremely high rate of interest.

What Determines Your Credit Score?

Knowing some of the factors that financial institutions use to determine your credit rating will help to give you a better understanding of your score, and also how to improve it. So let’s have a look at some of these factors now.

Age & Your Credit Rating

Age is one of the first things that are taken into consideration for your credit rating. If you are of working age between 24 to 64 years of age you will score one point, if you are below or above this age you will score zero.

Your Family & Your Credit Rating

If you are married, you may have a chance of adding an extra point to your credit score. If you are not married, or do not have any dependants, then you will score zero.

From the creditor’s perspective, a single person with no family ties can easily pack up, leave town and not repay their loan. So they are naturally considered to be a higher risk.

Your Home & Your Credit Rating

Creditors are interested in your current living arrangement. If for example, you currently own a home with a mortgage or even without a mortgage, you will score more points than if you did not own a home.

Another important factor is how long you have lived in your current residence. The longer the better. If you move around regularly, you will be considered a higher credit risk.

Other Factors

Other factors which will influence your credit rating include how many years you have been working, what type of job you have, how much you make each month (your income), present debt status, previous credit history and how much money you have saved in a savings or checking account.

Your Credit Score

Credit scores are normally in the range of 350 to 850 points. The lower your score, the more difficult you will find it to get a loan. Ideally, you should aim to maintain your credit score above the 700 mark.

How Do You keep A Good Credit Rating?

A good way to keep a good credit rating is simply to limit the amount of debt you expose yourself to. Since one of the biggest causes of debt is unpaid credit cards, it is a good idea to not sign up for more credit cards than you need.

How many credit cards does a person need? Well that depends on your circumstances, but usually one is plenty and at most two or possibly three credit cards if you are in a large family.

Of course with these credit cards you should always make sure that you repay your monthly credit card statement in full and on time. By doing so, you will avoid having to pay interest and won’t risk damaging your credit score.

Another way to keep a good credit rating is not to apply for too much credit in one go, and to limit how often you apply for credit.

If you are constantly seeking large amounts of credit, credit agencies may give you a low credit rating because you will be seen as a person who can’t live without credit.

Finally, how much you exceed the limit on your available credit is another important factor that determines your credit score. So try not to exceed 30-35% of your available credit.