Business Strategies

Things You Could Do To Improve Your Credit Score Before Applying For A Loan

Applying for a loan could be frustrating. There are requirements that need to be furnished and acquiring them could be time-consuming. If you are an employee you have to show proof that you are receiving salary monthly or if you are an entrepreneur that your business is making money. This is important because it will show the bank or the financial institution you would borrow money from that you are capable of paying them back.

Aside from the requirements, you also need to have a good credit score for the loan to be approved. Having a good credit score is a guarantee that you are a good payor and the bank or financial institution could approve of the maximum amount you are eligible to borrow.

Make Sure You Do Not Have Any Pending Debts

Having debt does not necessarily mean you are not eligible for another loan. But if you could settle your pending debts before applying, the chances of your application being approved is high. Your debts that would be checked does not necessarily mean existing loans and credit cards only. At times even phone bill is included in the background check. Missing or late payments would also affect your application. As a rule of thumb, make sure that you have at least six months of on-time payments of minimum due.

Don’t Exceed Your Credit Limit

If you could make several small payments to your credit cards to keep your credit in check, this would help improve your credit score. Paying as soon as you use your credit card is also a good practice. This would reflect on your financial record that you do not wait for the due date to settle what you need to settle and that you are not spending beyond your means. When you apply for home loans hawthorn, this would demonstrate that you prioritize your debt payment before anything else. If it is also possible, apply to have your credit limit increased.

Settle Maxed Out Cards First

If in case you have more than one credit cards, settle the maxed out cards first because it would help lower your credit utilization rate. Credit utilization rate is how much you spend against what you are “allowed” to spend. The lower your credit rate is, the better because it signifies you are up to date with your payment.

Review Your Credit Report

After doing all these steps, the next step is to review your credit report. See if there are significant changes. Report if there are any disputes and have the report updated to reflect all your efforts in improving your credit score. Any false information could significantly affect your score so you have to double check the report. Once you are sure that everything is in order, you could now submit your application for a loan.

If your score is not as high as you expected, do not be discouraged. There are still banks and financial institutions that could still approve of your loan. Inquire beforehand if there are anything else you could do or any documents you could submit in support to your application to further prove your credibility.

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