Making sure your credit score is in tip top shape is an important factor if you’re looking to make a major credit purchase like a home loan, auto loan, or even a personal loan. Having a higher credit rating increases your chances of being approved for such loans and can also help improve your overall financial health.
An expert says consumers should go beyond just checking their free credit reports from TransUnion, Equifax and Experian, and speak to a financial professional about their score to analyze their current standing.
“Too many people rely on credit analytics apps that can be off by as much as 100 points,” said Joseph Allen, loan manager at Quontic, a digital bank. “Apps and monitoring services often exclude critical information such as collections and charges, which has a big impact on a credit score. Second, they should consult someone who has experience reading a credit report, like a mortgage banker.”
Your credit score is usually one of the first things lenders look at when considering giving you a loan. To make sure you stay up to date with your credit status, sign up for a credit monitoring service. Credible can help you get started.
How can consumers improve their credit scores?
Consumers can take several steps to improve their credit scores, Allen says. The first is to have several credit cards – two to three – and use them constantly. He also recommends keeping balances below 30% of the limit and making on-time payments for bills. Borrowers can keep their balances low by paying down debt or increasing their credit limits.
“People think that by just paying off old bad debt, their scores will go up,” he says. “Credit is really ‘what have you done for me lately?’ Paying off a collection account that’s two years old can lower their score.It’s more important to have open and active lines of credit.
Those who start with no credit score can also add themselves as an authorized user to a close friend or family member’s account to start building credit. By doing so, the other user’s card history appears and should improve your credit report.
If you want to see how your credit score is or sign up for credit monitoring, which will help you make sure your credit isn’t affected by things beyond your control like identity theft, visit Credible. Credible Partners Can Help Americans Know Their Credit Profiledispute incorrect charges and take steps to improve their credit.
What are the benefits of a good credit score?
There are various reasons why consumers should focus on improving their credit score. And it’s never too early to start working on a good credit rating.
“A good credit rating will help you get cheaper credit, both in terms of fees and interest rates,” Allen says. “It will allow you to have greater purchasing power. It is also a good crutch in case of an emergency or a major crisis in your life.”
Given enough work, consumers could drastically change their credit score in three to six months, according to Allen. They can improve their scores by getting a better credit mix or by increasing their available credit.
Here’s how Americans could save with higher credit scores:
Mortgage refinancing: Mortgage interest rates are at historically low levels, below 3%, according to the latest data from Freddie Mac. Homeowners with good credit scores — 670 or higher on the FICO scale — and a strong credit history can take advantage of these low rates. Visit Credible to find rates from multiple lenders at once and select the best rate for you.
Student Loan Refinance: As we approach the 2021-2022 school year, student borrowers can also take advantage of today’s historically low rates. Borrowers with private student loans can refinance them at today’s low rates and save money on their monthly payments. The higher their credit score and the better their payment history, the lower their rate will be.
In fact, an analysis conducted by Credible found that borrowers who extended their loan term by an average of 53 months reduced their payment by $253 per month.
Personal loans: Consumers can take out a personal loan at lower interest rates that can even be used to help pay off high-interest credit card debt. This cycle will continue to improve consumer credit scores and will continue to open up new financial opportunities. Visit Credible to see how much you could save with a personal loan.
Do you have a financial question, but you don’t know who to contact? Email the Credible Money Expert at [email protected] and your question might be answered by Credible in our Money Expert column.