With time, the way companies ascertain the eligibility of a person for the approval of Loans have changed significantly. Today, instead of many different points, a company just calculates their credit score and use it as a measure to decide whether a loan must be approved or not. A credit score is a vale that is determined using a person’s credit files to ascertain their creditworthiness. A higher credit score means that a person has a better chance to get their loan, be it a home loan or a car loan sanctioned. Here are some ways for you to increase your credit score-
Clear those Standing Credit Card Bills
Most companies have started using only the credit scores of people so as to determine their eligibility for loans, and a pending credit card bill is not a good way to improve that credit score of yours. The analysis of a credit card directly shows your paying capability, meaning how consistently you can pay off your loans, so an unpaid credit card bill is not something you need if you are looking to improve your credit score, as this will definitely impact it, and not in a positive way.
Don’t Remove Old Paid Off Debt from your Report
The old debts which you took and paid off, be it of any kind generally remain on your report for seven years, after which they get removed. Some people believe that these old, paid off debts are bad for their credit scores. But in fact it is the exact opposite of it which is true. Your credit score will be good if your report includes all those debts and interest rates which were well managed by you, and which you paid off in time. So never try and get those loan histories removed from your report.
If someone has more liquid assets, it affects their credit score in a positive way. So when you apply for a loan, be ready with a list of all your shares, mutual funds and other liquid assets so that your credit score gets better as it will help you get your loan sanctioned quite fast.
Lower your Credit Utilization Ratio
Before you apply for a loan, be sure to lower your credit utilization ratio for a while. A credit utilization ratio is ideal if it in the the range of 30% or less. This will present a good picture of your report and will add positively to your credit score, in turn helping in getting your loan approved. Also, it will our less burden on you to pay off any previous standing debt.
Conclusion- Don’t be obsessive about your credit score. It is advised to do additional things to improve your credit score only when you are looking forward to apply for a loan. In other times, just try and pay off your credit judiciously and on time. That is what will affect your credit score the most on long term basis.