Free Credit Reports
Have you ever been denied a credit card application and wonder what could have happened?
Most likely, your credit score wasn’t good enough. Your credit scores are a very important
measure of your financial health. It tells lenders at a glance how responsibly you use your
There are many benefits that you can receive with a good credit score. Several factors can
influence your credit score. It is mostly based on your credit history. For example, were you
able to pay your credit card dues and other bills on time? Are you diligent in keeping your loan
payments up to date? How many accounts and loans do you have? These are just some
questions that come to mind when we talk about your credit score.
Being aware of these factors and the measures you can help to increase your credit score. Pull
a copy of your credit report from each of the major credit bureaus: Equifax, Experian, and
TransUnion. Once a year you can pull a free credit report through the official AnnualCreditReport.com website. Review each report to see what’s helping and hurting your
What credit score should one have?
A common credit-scoring system used by financial institutions is the FICO score. Your FICO
score would range from 300 to 850. The higher your score is, the better, it means there is a
lower risk that you will not be able to pay your loans. A credit score of 700 and above is
considered good. Aside from getting your loan approved easily, a high credit score can give
you benefits like a lower interest rate or better payment terms. For utilities and other services,
a high credit score can get you lower or no initial deposits. For credit card applications, you
might be given a higher credit limit or better interest rate.
If a borrower has a bad credit score of below 640, they are taking on more risk to lend money,
thus they will charge a higher interest rate. Or it may be that you will be required to have a
co-signer or co-borrower. It is also less likely that you’ll get approved for that credit increase or
About your credit score?
Different people can have different results as there are a few factors to consider, and each individual’s financial behavior and habits play a huge role. But knowing the different variables that affect a credit score can go a long way to improving your credit score.
These variables are the main information collected to form your credit score. Familiarize yourself with them and you will find it easier to add a few points to raise your credit score.
Payment history accounts for 35% of the total credit score. This reflects how an individual
pays his loans. One should make it a point to be diligent and pay dues on time. Late and
delinquent payments will definitely lower your credit score.
Total loan amount, or credit utilization, form 30%. This is the ratio of your credit card balance,
or used credit, over the available credit given to you. If you have high credit utilization, it
indicates you’re spending too much and not paying enough. This can negatively affect your
How long your credit history is accounts for 15%. The longer your credit history is, the more
your payment history reflects your behavior and thus gives more information for your credit
score. For this reason, it’s a good idea to keep your credit cards active even though you’re not using them.
Types of Credits
Different types of credits someone is using accounts for 10%. A good mix of car loans,
mortgage loans, and credit cards would do well for your credit score.
Additional credits or newly approved loans or accounts form 10% of your credit score. This
includes any pending application resulting in credit inquiries.
How fast can one improve their credit score?
Credit reporting agencies regularly review credit scores and factors. And any updates or activity related to one’s credit standing would affect and be reflected on credit their score. It can go up and improve your ranking, or go down and make it worse. Depending on the statement or cutoff
period, and what the change is, one can see changes in credit score within a month to few months depending on the credit factor and when the creditor reports to the bureaus.
Though there is no fixed period or an exact promise when you will see the changes, as it
depends mostly on when the business processes credit reports. It can be daily, weekly or
monthly. Timing is important as well as the scores are immediately calculated as soon as
information comes in, it’s just a matter of when the cutoff is.
However, there’s also no guarantee that your score will change at all, as the monthly changes might not be relevant enough to get enough points to affect the numbers. So if you want to see positive movements, it is advisable that you not only do one positive change but a few significant ones. Here are some positive moves you can do to improve your credit score:
Pay on time and keep your credit utilization low by paying as much as you can.
Be responsible with your payments and see the effect on your credit score in six months.
If you have a high credit card balance, a fast way to improve your score is to pay lump-sum just
before your statement date. This is when strategic timing plays a crucial role in increasing your
credit score by having a better credit utilization rate.
One way to reduce your credit utilization is to have as many credit cards as you can possibly
have approved and managed. This increases the credit limit available to you and if you keep
your spending low, you’ll have optimal credit utilization.
Time to level up and request an increased credit limit. This is another fast way to increase
your credit score. Inquire how to increase your credit line and if your credit score is good
enough, you’ll easily get approved. The higher the credit available to you, the better it is for
your credit utilization, especially if you manage your balances well and keep it at minimum. All
of these positive points in your credit score will serve you well when you go for the big loan.
Reporting any negative errors on your credit reports and credit statements can also improve
your standing. Be vigilant in checking your credit card statements and report any errors or
omissions immediately to your credit card company.
On the flip side, be careful not to have negative entries to your credit score as it will offset and
even negate any positive change you have on your score. For example, you might have been
approved for a credit limit, but if you have a late payment on the same statement cycle, you
might not see any positive change at all. Try to minimize these negative activities like late
payments as it is not easy to offset them as they accumulate.
Keep in mind as well that it is not as easy to improve credit score negatively affected by adverse
events such as bankruptcy, foreclosures, delinquent accounts, closed credit accounts. Those
stay long on your records and it is not easy to offset these. And if it just happened, it will have a
greater impact on your credit score.