How to Improve Credit Scores Before You Apply For a Loan

Whether you’re in the market for a new car or a home, you’re more than likely going to have to go through the loan application process. Too many people never bother to check their credit reports beforehand and hope that crossing their fingers will do the job.

With lenders decisions being based on the policies set by their corporate offices, a change of just one point can mean the difference between being approved or denied. Additionally, even if you’re approved, a slight boost in your credit score can change the interest rates that you’re paying and save you thousands of dollars a year.

Credit repair and debt relief seem like the obvious answers, but there are so many things that you as a consumer can do to make sure that your credit scores are reaching their full potential.

Pay Your Bills

This shouldn’t even need to be listed as a topic of concern for those looking to boost their scores, but you’d be surprised how many people will skip a month here or there. Late payments can lower a good score more than 50 points. Now, over time there is less of an impact, but every time you make another late payment, expect your score to sink even further.

Keep Balances Low

Lenders want to see that you’re using your credit sensibly, so maxed out accounts will only lower your score even more. You want to keep those balances around 20 to 30 percent when possible. The longer you keep them there, the higher your score is likely to climb.

Diversify Your Credit

The type of credit that you use is important too. If lenders see that all you have is a gas card and a department score card, they’ll be less likely to think that you know how to use credit maturely. Generally, the people with higher scores have three to five lines of revolving credit and an installment loan.

Keep Old Accounts Open

A portion of your credit score is based on the length of your credit history. While you may think it would help your score to close out old, unused accounts, you may actually be hurting your score in the process. Use old accounts sparingly to make sure that they stay open and active.

Apply for Loans in the Same Month

Repeated inquiries will generally lower your credit score. However, the credit bureaus can generally tell if you’re looking for a loan within a short period of time. It’s best that you apply for that loan within a small timeframe so that the bureaus don’t get confused and lower your score as a result.

Be Responsible

While it’s not a specific method to maximizing your credit score, it really is a guiding principle on how to improve credit . Don’t spend over your limits, make payments on time every month, keep you balance low, and try to budget and you’ll find that your credit score is going to take care of itself. With just these few changes to your financial approach you can revitalize your score within weeks. You’ll be so glad you did.



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