5 easy credit repair tricks to help you borrow money successfully
Your Credit Score
The contents of your credit report can make or break your next loan application and your ability to borrow money. A good FICO score is the key to success. However, if your credit has taken a beating in recent times, you will have to do a little dusting off. The good news is there is still hope and you can easily impress a scrutinizing loan officer by implementing a few simple strategies discussed in this article.
How lenders grade your credit worthiness
There are various factors that lenders look at when it comes to underwriting a loan. To keep track of all these factors in today’s credit-driven environment, lenders use FICO scores to put everyone on a standardized scale. Doing this is useful in making quick decisions about a borrower’s:
– loan balances
– ability to pay
– payment habits
– history of seeking credit
To repair your credit, follow the steps below and your FICO score will improve accordingly.
Step 1: Make a plan
Planning to apply for a loan in advance of actually putting in your application can affect your outcome tremendously. If you have a poor credit score, a window of 3-6 months will give you plenty of time to make important changes. What is most unfortunate is how little attention people devote to planning.
A poor (or, less than stellar) credit rating can not only affect your approval status, but it can also affect the amount of interest you will pay. As such, planning before applying not only improves your chances for getting approved, but it also saves you money in the long run by lowering your borrowing costs.
Step 2: Decrease your loan balances
In simple terms, if you are using all of your credit (or worse, exceeding it), you are not likely going to be approved to add yet even more credit to your portfolio of debt.
As a general guideline, you should not exceed 75% of the credit limit on each account. Notice how I’ve said the credit limit for each account rather than all of your accounts combined. If you have a credit card with a $1,000 limit, pretend that the limit is actually only $750 and commit to sticking to this personally-imposed reduced limit. Apply the same formula to all of your other cards and their respective limits. This practice can impact your score dramatically, which will ultimately help you borrow money successfully. Use the next 3 – 6 months to bring down your limits to ideal levels.
Step 3: Know about your ability to pay
Aside from usage, there is another factor that relates to loan balances that can affect you. If you have too many accounts open and not enough income to service those accounts, lenders might classify you as a risk that they’re not willing to take.
Unfortunately, if this is the case, there’s little you can do. You could pay down your balances, which would be good for your FICO score anyway, but it won’t eliminate all the excess credit you have (which will still affect your debt ratios).
If you are tempted to close down some of your accounts that you don’t use, think again. Closing down various accounts is not always a good idea because that can affect you credit negatively. The only advice I have here is to refrain from opening up useless accounts in the first place (like department stores or specialty cards that you really don’t need in the long run) and simply lower your balances. Working to improve other factors will help your score overall.
Step 4: Improve your payment habits
If you have had many late payments in the past, your score is bound to be bruised as a result. However, if you start to improve your payment history from this day forward, your improved activity will be reported and you will start to notice boosts in your FICO score. Vow to make all of your payments on time – from this day forward!
Step 5: Do not seek credit
If you plan to apply for a loan in the next 3 – 6 months, do not seek any credit whatsoever between now and the time that you apply. Each time you seek credit, you get what is known as a ‘hit’ on your report. Hits lower your FICO score slightly. While they don’t make huge impacts, having plenty of them (and, being subsequently rejected) is not a good situation for prospective lenders to discover when they pull your report.
Put the above strategies into play and you will start to see dramatic improvements in your FICO score. To borrow money, lenders just want to make sure you are a good credit risk. They actually want to lend out as much money as they can. That is how they profit, after all. However, before profits, lenders have another priority and that is to protect their capital. If you do all your homework, and launch a plan in advance and put the strategies discussed in this article into play, you will come out ahead.
Get professional credit repair help
Speak to a professional today and take proactive steps to repair your credit. For a FREE credit consultation, call 1-877-563-2076.