How To Improve Your Credit Score

A credit score is a form of report that tells lenders about a person's creditworthiness, meaning how likely an individual is going to pay back a loan based on his/her credit history. It is a number that summarizes credit risk, based on a snapshot of a credit report at a particular point in time. The credit score is calculated using the information in an individual's credit report and is used by a majority of top lenders.

Credit scores influence the credit that is available to a person and the terms (interest rate, etc.) that lenders may offer. When an individual applies for credit, be it a credit card, an auto loan or a mortgage, lenders would always want to know what level of risk they would be taking by loaning that money. When lenders order a credit report, they can as well request for a credit score that is based on the information in the report. A credit score helps lenders evaluate a credit report.

There are several credit score ranges. Most credit scores have a 300-850 score range. The higher the score, the lower the risk to lenders. A "good" credit score is considered to be in the 670-739 score range.

Investing Port has researched and would be outlining some tips on how to improve your credit score.

·      Practice early repayment 35% of the time

Paying your loans early and not missing payments is the sure step you can take to improve your credit scores. Lenders often investigate an individual's repayment history to assess the likelihood of payment loans in the future. Repayment history can include payments of bills that are not actually loans, but which recur at intervals such as monthly utility bills.

·      How is your credit utilization ratio?

Credit utilization ratio is the percentage of credit limit that is being used. Lenders always want to keep that ratio below 30%. If it is higher than 30%, it makes them worry that an individual cannot afford to take on new debt. It is very important not to spend up to the maximum amount that creditors will allow. Spending on credit cards plus any loans should be limited to 30% of combined credit limits.

It is also important not to cancel any of your credit cards right before applying for a mortgage, even if you do not use some of them. The problem associated with this is that when you cancel a card right before applying for a loan, you lose your right to use that credit. That pushes up your overall credit utilization rate, possibly exceeding the 30% ceiling.

·      Make sure the length of your credit history does not exceed 15%

The longer a credit card has been used to apply and paying for loans on time, the better. Have a long history of on-time payments and a low credit utilization ratio, it shows that an individual can manage credit responsibly and is a good risk to lenders.

·      What type of credit is being used?

Different credit types include home mortgage, home equity loan, car loan, student-loan debt, credit cards and so on. Having different credit types displays your ability to manage different accounts. Different credit loans should not be taken initially, but as time progresses.