If applying for credit is expected to be imminent, there are certain processes that can be undertaken in order to affect a credit score positively in order to maximise the success of an application.
Firstly, apply for a copy of an up to date credit report from a credit bureau or agency. These include but are not limited to Experian, Equifax and Trans Union (there are many other agencies located in various countries so please check for local examples). By checking an up to date credit report, any discrepancies that may not be correct can be erased from the report and could have a positive effect on the overall rating of that person.
Payment history from existing credit can make up a large sum of a credit score, sometimes up to 40%. Recent transactions are considered much more favourably than those of say three years in age so it is important not only to make regular, on-time payments but to ensure recent transactions are well maintained. Simply missing or being late on one repayment can have a serious consequence to someone’s credit score. Though many credit agencies use different formula to determine credit ratings and scores, it is thought overall that the single best way to build and improve on a credit score is through on-time payments.
In some cases, credit bureaus take into account the actual balance of credit being used in comparison to the total available credit someone has. So using only 10% of available credit will be more beneficial to credit scores compared to having 80% of the balance owed. It is often irrelevant if the full balance is paid off regularly for that period. Even though is makes financial sense to do this for the client, a credit agency will not take that fact into account and will look only at the balance of credit.
It is wise to make sure that when applying for a credit card, to ensure that the company involved report credit limits to associated agencies. When this is the case a credit bureau will not be aware of a credit limit and will use the highest previous balance as the maximum. This in turn means that should that level be exceeded, the credit report may note that the maximum has been breached when in fact it hadn’t.
If a recent debt has been paid, then it is wise to contact the collection agent to remove the entry from the credit report. This can be a very fast method to raise a credit score, fast.
As every credit bureau and agency differs in respect to how credit reports are built and scored, it is always wise to first request an up to date report from them to dispute and discrepancies that may not either belong to a certain person or remove entries that are out of date.
Related posts: