Your credit score is one of the most important figures in your financial life. This influences everything from being granted loans and credit cards, housing, to even being hired for a job. That is why it is reasonable to restore the credit rating when it is low. But, is it really possible to enhance credit?
What Affects Credit Score?
Before we proceed to assess how easy it can be to bring the credit up, let’s try to define what constitutes your score first. There are two main credit scores, which are FICO scores and VantageScore. While the exact formulas are proprietary, we know the main factors that impact them:While the exact formulas are proprietary, we know the main factors that impact them:
Credit history – Whether one pays bills on a regular basis. This usually contributes 35 percent of the credit score.
Credit utilization- A measure of how much credit one employs against the credit limit they are allowed. It contributes approximately 30% of the total scores.
Credit history length – This is a statistical measure of the length of time that the credit holder has had credit. This is approximately equivalent to 15 percent of a score.
Credit mix – whether you have different kinds of credit, charge cards, store credit cards, student loans, car loans, and mortgages, etc. This makes 10% of the score.
Number of recent credit inquiries - It is a common knowledge that new credit inquiries reduce scores. This is also 10% of a credit score.
Why Credit Scores Matter
FICO scores stand between 300 and 850. Most of the time the higher the number the better for interest rates, chances of approval, deposits and all things related to finance. For instance, when going for credit cards and loans, one’s credit score is often an influential factor that determines the approval of the application. It can also be verified by landlords and utility companies when evaluating applications. Car insurance companies themselves sometimes rely on credit information in determining the premium to be charged.
And remember that there are in reality more than one credit score that could be used. Thus, while one score is above the ‘good’ benchmark, another one can be below or above this figure. It is prudent to check all scores at least once in awhile.
Is It easy to Raise Your Credit Score?
Now to actually answer the main question: how difficult is it to increase the credit rating? However, major credit score increases typically take time and hard work; it is not an immediate process. The truth is there are no magical solutions, no read-made solutions to any problem. Consider factors like:
This is a clear indication that payment history issues do not easily wash off from your credit scores within the next 7-10 years. Bankruptcies stay even longer. Unfortunately, there is no magic solution when it comes to erasing these dings. The only thing that one has to do is to wait until this group influences wane and their power dissipates.
High Balances – When one maintains high credit card balances and high use compared to credit limits, this severely impacts scores. Eliminating balances requires fiscal responsibility over months or years. It is not something one can change within a day or within few hours like flipping a switch.
Length of Credit History - Another aspect that cannot be improved in a short span of time is the length of your credit history. The only thing you can do is to wait for some time as you ensure that you are handling accounts creditably.
Sparse Credit Mix – Small credit accounts with one or two credit cards reduce scores due to thin files. As in the past, the only solutions are time and periodically adding new responsible accounts.
However, what is stated above may sound quite disappointing, nevertheless, every single point of improvement done responsibly does improve scores in the long run. A dollar at a time and month by month, you’ll arrive at the destination you desire. As long as you don’t anticipate immediate results in days or even weeks, you should be fine. This is the way to go, so be patient and keep on practicing it!
Ways of Building a Good Credit Score
Now that expectations are set correctly, here are practical steps to start strengthening your credit over time:Now that expectations are set correctly, here are practical steps to start strengthening your credit over time:
Always pay all bill on time from now on – this simple changes in behaviour can improve scores in the long run if one has been late in doing so.
Maintain credit card balances to the lowest levels possible to the credit limits.
Pay your lenders/creditors if ever there is a time that payments become impossible or would be difficult to make. Most of them have options for those facing hardships. Payment delinquency was particularly damaging, even when made up for later.
Do not cancel old credit cards as they contribute to history length in the scores even if you do not use them.
Add in some installment loan history such as car loans, personal loans, etc., along with credit card accounts.
Let all inquiries or score drops after new applications disappear completely before applying again.
The Takeaway
Well is it easy or fast to fix credit and raise scores? Not typically. Often, one has to work hard with a lot of concentration to make a positive change, and this requires time. But with a lot of patience, perseverance and proper training, you can achieve what you want. Be patient, be persistent, and be actively involved in the building of responsible money personality each and every day. You will slowly start seeing positive changes on your score which will follow your new positive life.
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