Different Ways of Improving a Credit Rating

It is very important to have a good credit rating in order to be eligible to apply for a loan. Financial institutions are becoming very particular about who they will lend to. Banks and other building societies offer their best deals only to those who have a trustworthy credit history. Therefore, you should improve your credit status before applying for a loan, mortgage or credit cards. It allows lenders to consider your application for approval.

First of all when you are applying for a debt, it is important for you to request a copy of your credit file to ensure that the information in a file is up to date and accurate. Another critical reason why a person should check his credit file is to ensure that his details are not being used by third parties for identity theft. Inform your lender immediately as soon as you come across such a situation in order to save yourself from the adverse impact it can leave on your creditworthiness. Secondly, it isn’t just your credit history the lender will be finicky about when you apply for credit. Lenders also check the credit history of your immediate family members, such as spouse, parents or anyone else with whom you have a joint account in a bank.

How you manage your credit goes a long way to determine the success of your credit rating in the short run as well as in the long run. A lender is always keen to see how efficient you are in managing your credit sensibly. If you are a credit card holder, make sure that you pay off the balance every month in order to avoid interest payments. Moreover, make regular mortgage payments because missing even a single payment is regarded as an unforgivable sin as far as financial institutions are concerned. Tell your mortgage lender to extend your mortgage terms to lower the monthly payments but it also means that you have to pay more interest in total. Therefore, be regular in making payments after mortgage terms are revised or else your credit score will reduce dramatically and will adversely affect your credit rating.

Your Personal Financial Mentor always advises you to settle your old debts before applying for a new one because an additional debt will only decrease your debt capacity and your credit score can drastically drop if you make an effort to pay back such a huge amount of debt. Lastly, if you suffered from financial problems after divorce or redundancy but have improved your financial position since then, you should state these facts in your credit file. Also make sure that credit problems caused by the identity fraud have been removed from your credit file because if it’s not your fault, then it should be there in a file. Your credit file changes frequently. Therefore, it is necessary to check on a regular basis that it is still accurate.

Categories: Credit

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July 3, 2013 Different Ways of Improving a Credit Rating