Ways to improve credit score

When applying for loan, lenders will check the credit score of the applicant to know how much capable he or she is. Credit score is nothing but a number that indicates to creditors and lenders how likely a person is to pay back loan amount based on his past borrowing behavior. If he has higher credit score, he will be more likely in the eyes of the creditors that he will repay the money quickly. The credit score is used for determining whether a person can obtain credit for things such as credit card or loan to buy either a car or house. Lenders use this score to determine the type of loan a person qualifies for and what his rate will be.


Tips to improve credit score

Let us see some useful tips you can follow to improve your credit rating.


  • First you have to pay the bills on right time. The ability of paying bill on time can earn you up to 35 percent of credit score. So, you should not delay your payments and collections as it can hurt the credit score of yours very badly. The payment details will be mentioned in the payment history for about seven years. So, stay correct by paying the bills as quick as possible with no delays.
  • Secondly, you have to keep your credit balances very low. Your total debt will be calculated by dividing your total credit by total available balance. This can covers 30 percent of your credit score. A better or reasonable goal is to have a debt level of about 30 percent or lower than this percent.
  • Next you have to avoid short term tactics to reduce the level of your debt. The most common mistake most of the people do is not closing unused credit cards. This can affect the credit score by lowering it and thus, increases the debt level. People should not buy a new credit card they did not need just to raise the credit score. Buying many new credit cards in a shorter period can increase the risk. It may also lower the credit score of a person. About 10 percent of the credit score is affected by buying new credit cards.
  • Pay off the debt instead of moving it around. This is really an effective way people can follow to improve their credit score that is hampered by a high debt level. It is suggested to maintain the total revolving debt below 20 percent of the net annual income.


Follow these steps to maintain your debt level as well as your credit score that is capable of buying loans easily. Credit rating is more like the driving record of people. This takes into account several years of past actions as well as present actions. It is very important to maintain a good credit rating to become eligible for obtaining loans. If you have a bad credit score, no lender will like to do anything with you that would point to risk.