Banks are becoming very strict when it comes to granting loans. These days, getting one requires people to exert more effort and be more mindful of any potential problems. Not even people with very good credit are exempt, as they are ‘forced’ to go through a lot of things in order to avoid being branded as a risky borrower. People looking to improve their credit can employ a number of techniques that not only increases the chances of having a loan approved, but also command a better interest rate.
Paying bills on time is an obvious tactic. But this can be made even more effective by making sure to not overextend on credit. Someone who has a credit limit of $10,000, but only owes $1,000, is much more attractive to a lender than someone who has the same limit but owes $8,000. By paying down the credit before applying for a loan, a borrower increases the chances of improving the credit score.
Borrowers have to be careful in paying down debts, however, as some creditors actually reduce credit limits as the debt slowly gets paid off. When this happens, borrowers need to ask for the credit limit to be maintained, or raised, or just switch to a different credit card. It is also important that the account is kept open. This makes sure lenders can see the borrower’s whole credit history, which can help in their decision.
The next thing a borrower can do is to check their credit score on a regular basis, or before the application for any type of loan or second mortgage is submitted. This is because the U.S. Public Interest Research Groups have shown that nearly 8 in 10 reports have discrepancies and errors. This allows the borrower the chance to fix or dispute any discrepancies in the report. There is no harm in asking for your own report, so feel free to get them as you wish. There are three credit bureaus that can give this information, all of which can be accessed at annualcreditreport.com.
There are companies that will offer free credit reports, in exchange for signing-up for a service. These services will usually have a monthly fee, though, so be very careful of these companies.
Some might be intimidated by all of these requirements, and might not find getting good credit worth all the trouble. However, having good credit, especially in a continuously-changing economy, is very important. Not only does it ensure a lifeline should troubling times come, but it also prevents having high interest rates, high insurance premiums, and high rental rates. In addition, good credit sometimes improves one’s eligibility when it comes to employment, as many employers will prefer people who can demonstrate a good grasp of responsible money management.
Managing your credit at least once a year is very useful, and may help you avoid having to seek a bad credit home mortgage refinance.