Tips to Building a Better Credit Profile
Tips to Building a Better Credit Profile
Tips to Building a Better Credit Profile
Manytimes credit repair and debt relief end in disappointment for consumers because they expect their scores to skyrocket once they have removed some derogatory accounts or paid off some debts. The same type of surprise awaits people who have used cash their entire lives, never once applying for a credit card. They're astonished when they are turned down for a loan.
Whatever the reason your score is low or maybe even non-existent, building a better credit profile and boosting your score, though not an exact science, is a goal worth setting. Everybody needs to understand that this isn't an overnight fix. Developing a good credit score takes months, even years of sustained, responsible credit usage.
So where exactly do you begin? Well we've gone over a short list of the best ways to get on the road to a premier credit score.
Gauge Your Situation
If you don't know what your credit reports are saying about you then you can't possibly hope to know what steps are going to work best for you going forward. Get all three of your credit reports from the major credit bureaus. They're free to consumers once every 12 months. If you're still a bit unclear when you're reading your reports, finda credit repair company that gives free consultations andask any questions you might have. There are also thousands of people on the Internet that are willing to help you out.
You want to repair your credit reports as much as possible before trying to build a better score. There's not too much you can do if you have accounts on there that are hurting your credit profile.
Consumers with no credit are considered unsafe investments since there's no record of any sort of borrowing history. Lenders will ultimately default those individuals into a high-risk category.
Keep Old Accounts Open
Usually consumers close out accounts in good standing if they haven't been used in a while and then wonder why their credit scores have gone down. The length of your credit history is one of the major contributing factors to your scores. Closing out an account can drastically lower the average amount of time your cards have been in use.
You'll also want to make sure that you use those open accounts, even if it's in small amounts. An open account with a zero balance doesn't tell lenders that you are actually capable of handling debt, which is what they want to see.
Try to Have 3 Revolving Accounts
The people with higher credit scores usually have somewhere between 3 and 5 open lines of revolving credit. If you're just starting out with building your credit, or are rebuilding your credit, this isn't realistic. Obviously you'll need to start with one card and build from there. After showing that you're responsible you'll be able to open more cards, and eventually apply for loans.
Be Responsible
It seems like such an obvious piece of advice: pay your bills on time and don't spend over the limit. But somehow millions of consumers continue to make these same mistakes. Whether it's out of necessity or sheer stupidity, lenders don't care. If you have a tendency to max out your credit cards, or not make payments, you'll be considered not worth the risk.
Be Patient
Lenders are going to need to see 6-12 months of real responsible credit usage to consider a consumer a viable risk. Mortgage lenders will probably need to see longer credit histories before they feel comfortable extending you an offer. Now, if you're in the rebuilding phase, they'll want to see that those negative accounts are at least 2 years old and that you've been responsible since those mistakes.
It's not an exact science, but if you pay your bills on time, keep your balances below 20% and build your credit profile slowly and reliably, you'll be telling lenders that you're a low-risk borrower, worthy of the industry's best interest rates.
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