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Practical Tips in Enhancing Your Credit Score

By Ruth Racey
Published: Monday, November 2nd, 2009

People with higher credit scores are priorities when it comes to obtaining loans.  Understandably, a lending company would prefer a customer with a higher credit rating than one with bad credit.  Thus, if you have a plan to apply for a loan, it would be wise to first check your credit report and see if you will pass the lender’s credit requirement.

What if you do have a low score?  How can you enhance your credit and increase your chances of getting a loan approved?  Below are practical tips in rebuilding bad credit:

Stick with the schedule.  Payment schedules should be taken very seriously.  Do not neglect due dates even if you only need to pay a very small balance.  Thirty-five percent of your score depends on how you stick to due dates.

Do not give yourself a hard time.  Paying debts on time would be a lot easier if you keep them small.  Before using your card or taking a loan, ask yourself, “Is my monthly income enough to pay off this debt?”  Be realistic and stick to your limits.

Limit your applications.  If you are in need of a loan, do not try your luck by submitting different applications to lending companies.  A lending company will inquire about your financial record and they will see all other inquiries made by other lenders.  That would put you in bad light and you will be regarded as a desperate borrower with a low credit score.

Pay off debts.  A big step in enhancing the credit score is to pay off debts.  If there are too many outstanding balances in the financial history, it shows that you have not been able to manage debts effectively.  Consequently, you can expect to have a low score.  On the contrary, paying off your debts shows that you are a responsible borrower who can be trusted.

Free up your credit line.  It does not matter whether you have a low credit line or a higher one.  Avoid using up the credit to its limit.  As much as possible leave at least 50% or more of the limit free from charges.  A low credit-to-debt ratio is a great way to improve your score and to build a good reputation with lenders.

Safeguard your credit.  Financial reports are prone to errors or mistakes and these can unfairly pull down your score.  You have the right to demand corrections for these errors.  Check your report at least twice a year so you can see it there are errors to be fixed or charges that you did not make.

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