Building your credit is not as complicated as it may seem!
You may have heard that your credit score is incredibly important, and it is impossible to argue that this fact is not true!
Poor credit can affect your interest rate on multiple consumer loans (making them more expensive) and whether or not you will be able to access certain financial products.
Are you in a less than perfect credit situation trying to figure out how you will build it back up?
We know that this can at times seems impossible…
The good news is that we have some tried and true methods you can use to build your credit, no matter how grim your situation may be.
And by avoiding a few common credit mistakes, you can have that credit score rising in no time!
Let’s dive in.
The most important way of quickly improving your credit score (or halting it from falling) is to make your minimum credit payments on time.
Missed payments can be absolutely detrimental to your credit score.
If you find yourself forgetting to make pay on time, try setting up auto-payments as soon as possible. This takes out all the legwork!
The next thing you want to do is to try and keep your utilization rate as low as possible.
If you aren’t sure what this means, have no fear, we have the definition below:
Utilization = the amount of credit you’re currently using divided by the total amount of credit you have available.
Still not making sense?
Here’s an example:
If you have a credit card with a $15,000 limit and you have a balance of $5,000, you have a utilization of 33% on that card.
Simple right?
As mentioned, lenders generally want to see that utilization be as low as possible.
So do your best to keep your outstanding balances at a minimum. In some situations, this takes time, and that’s okay!
Our final suggestion is to help save you from a very common mistake.
Don’t apply for multiple cards or loans at once.
While in actuality you may just be seeing what potential lenders will offer you, the result of this is that multiple credit inquiries or (credit checks) will all happen at once.
When a lender sees this, they will generally assume that you are potentially planning to take on a significant amount of debt in a short period of time.
Understandably this usually makes them a bit wary of giving you additional credit.
If you need to apply for additional credit cards, one or two at a time is generally no problem.
While just like in life there are no shortcuts in building up your credit score.
But these straightforward methods will help redeem it over time!
The most important things for you to remember are as follows:
Make your minimum payments on time, keep your utilization as low as possible, and avoid applying for multiple loans at once.
If you have any additional questions in regards to best practices in building your credit score or related to mortgage loans, please feel free to reach out to our team at California Lending Company at any time!
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