It is very important to have a history; in fact, it is a very good idea to start while you are young since, in the future, it will help you obtain financing for larger goals such as credit for a house.
In fact, one reason for rejection when applying for a credit or loan is not having a credit history or not having sufficient credit history. Remember that the purpose of having a score is so that whoever gives you credit knows how trustworthy you are and how likely they are to get their money back on time.
In this article, we will guide you through practical steps and insightful tips on how to improve your credit score quickly and easily before buying a house in New York City.
9 Tips to Follow to Improve Your Credit Score
1. Pay on time
This is the most important factor in achieving a good credit rating. Month by month, credit grantors report to all their borrowers and indicate who is late and who paid on time.
In the case of credit cards, covering at least the minimum payment each month will keep you a customer who pays on time. Although paying only the minimum is not the best financial strategy.
2. Pay more than the minimum
Covering only the minimum payment on your credit cards or other revolving credits can be very risky. In this way, it is easy to lose control of the debt as the interests continue to grow more and more. It is especially dangerous due to the high-interest rates charged by banks in Mexico.
That is why we recommend that you make an effort and pay more than the minimum or even pay off your card debt. This way, your debt, in general, will be more controlled, and your credit score will improve.
3. Keep your debt level low
Another very important aspect that Credit Information Companies take into account is the percentage you use of your revolving lines of credit.
The recommended rule of thumb is to not use more than 30% of your credit lines. Taking its use to much higher values could encourage over-indebtedness.
What do credit utilization and debt level refer to?
It’s very simple. For example, if your card’s line of credit has a limit of $10,000, the general recommendation is to use approximately $3,000. This is equal to approximately 30%.
It is very important to keep debt levels low or at least controlled. Always consider your payment capacity in relation to the amount of your debts to have financial health. Having very high amounts of debt will negatively affect our credit rating.
4. Do not request many credits in a short time
Another factor that is taken into account when determining your credit score is the number of inquiries to your report by credit grantors. Every time you make a credit application where your report to the Credit Bureau is requested, it counts as an inquiry.
Having many inquiries in a short time could give the impression that you are urgently looking for credits. This also tells credit analysts that your financial situation is not very good.
If you need a loan, we recommend that you analyze the different options available on the market and apply only to those that offer you the best conditions and best suit your needs.
5. Start generating your history
The length of your credit history increases the value of your score. If you still don’t have a history, we recommend applying for a simple credit product; take a look at fintech companies.
A common example is a credit card with a small limit; there are even cards designed for students. An example that many people do not know is that credit can also be a telephone plan with a cell phone paid in months. These options allow you to start building your credit history.
6. Use your credit card regularly
To improve your credit score, you have to actively use your credit products, such as credit cards. An account with movement is an account that is demonstrating payment capacity. Furthermore, if we add that the payments are up to date, it will demonstrate to the financial institution that you also have liquidity.
If you think that not touching your credit cards helps improve your score quickly, you are wrong. Not using your credit card makes financial institutions perceive you as illiquid, so as long as you pay your bill, using your credit card is the best thing you can do.
7. Don’t have many open accounts
If there is something that matters a lot to financial institutions, it is the concept of payment capacity.
So, let’s say your income is $30,000 per month, and you have a bank loan of $40,000. In this case, your credit limit is close to your payment capacity. But what happens when you have four or five other credits larger than this one?
What happens is that your payment capacity is not consistent with your credit limit. If you earn $30,000, but the sum of all your credits reaches a limit of $200,000, and you are using them to the limit, it is natural that financial institutions perceive you as a possible debtor in the future. Plus, that will negatively affect your score.
8. Pay before the deadline
Another tip we give you is to cover your payments before the deadline or even make partial payments during the billing period. Remember that for financial institutions and to improve your credit score, perception is the most important thing. What better than to show them that you have the necessary liquidity? Paying before the deadline gives a clear message: “I can pay.”
Likewise, it is not bad to wait until the last day to make the corresponding payment. That keeps your score healthy. However, if the goal is to improve it, you have to go ahead and cover more than the minimum, as we mentioned at the beginning of the article. This does not mean that you have to make the payment immediately when spending. It is enough to wait for your court date to arrive and pay in the following days.
9. Let time pass
If your credit history has already been damaged and your score has dropped as a result of late or even non-payment, it will seem difficult to restore your history and raise your score again.
It is normal to have doubts about how to raise your score if you are not given any credit. In this case, the best thing you can do is let time pass.
Debt is not your worst enemy! Debt can be a tool as long as you have it under control. It is best to have a few well-managed debts to improve your Credit Bureau score.
However (and we hope it never happens to you), there is the possibility of losing your source of income and, with it, your ability to pay; You could be forced to stop paying debts. For example, with credit cards, when the minimum payments begin to exceed your ability to pay, it is best to find a way to pay off that debt as soon as possible. If you don’t, your score will be negatively affected. But don’t worry, there are always solutions.
One of them is to refinance your debt to avoid falling victim to rising interest rates. For example, bank rates are usually very high, and paying off your debt can be complicated.
Try to put our experts at Cash Buyers NY recommendations into practice, and you will see how your credit score will increase!