Five Steps You Can Take to Improve Your Credit Today
Credit scoring is an important system for many Virginia residents. Unfortunately, it is not uncommon for Virginia residents to be unaware that credit scoring exists until it becomes relevant to them. For residents that have a good credit score or are not in need of credit may not be relevant, but many residents are caught off guard by how important credit scoring is, and may be put in a difficult position depending on their credit score.
Credit scoring refers to a grade that creditors use to decide how much credit is available to an applicant. Credit scoring has a big impact on credit card use, but it also determines a few other important factors. Anyone who is applying for a loan will have to go through a credit check to determine how much is available to them, as well as the interest rate on the loan. Many landlords will also request a credit check before deciding to accept a tenant.
Credit scoring starts at 300 and goes up to 850. A credit score of 670 is considered acceptable, with anything above that being classified as good or excellent.
Develop a Credit Score Early
Many younger Virginia residents are advised not to take out a credit card early. However, getting a credit card early is a great way to build up a strong credit score. After all, credit card holders cannot actually develop a credit score until they are given credit. The issue with younger residents having a credit card is not with the card itself, but relying too much on the credit card. Relying too much on a credit card is dangerous for younger residents, since it is easy for them to use the credit card for all of their purchases and fall into debt with reckless spending. Younger residents who are just opening up a line of credit to develop a credit score will not have to actively use their credit card, and so as long as they are careful, they will not end up in debt.
Residents who did not get a credit card when they are younger will still be able to develop a strong credit score, it will just take a little longer for them to build up their score.
Use a Credit Card
Simply having a credit card is not enough to start developing a credit score. Creditors look at how often the credit card is used, as well as whether or not the credit cards are maxed out. Credit card holders who charge everything to their card will have a negative credit score, especially if they have multiple credit cards that are almost maxed out. At the same time, credit card holders who never use their card will not improve their score, since creditors have no idea whether or not these card holders are actually financially responsible.
Many credit experts recommend using around 30 percent of the available credit each month. As long as the credit card holder does not miss any of these payments, he or she will be showing creditors that he or she is financially responsible.
Avoid Multiple Credit Cards
Something that has a big impact on credit cards is how many different cards the owner has. Having too many credit card accounts looks bad to creditors, since it gives the impression that the credit card holder keeps shuffling the balance he or she owes from one card to another. Creditors do take into consideration when the different accounts were opened. Generally, credit card holders who have multiple accounts, but opened them over longer periods of time do not raise as many red flags. Creditors also look at the type of accounts as well.
In addition to opening credit card accounts, creditors look at how many applications the credit card holder has filed. When looking at credit applications, creditors specifically look at applications the credit card holder has submitted. Any sort of preapproved credit card sent to the credit card holder does not count.
Pay Bills on Time
It is not just paying credit balances on time that has an impact on credit scores. Creditors look at the payment history of credit card holders. Some of the key items they look for include whether or not there are missed bill payments, if an account was referred to collections and whether or not the credit card holder has ever declared bankruptcy.
One or two missed payments will have a minimal effect on credit scores, especially if they are spaced out over a larger distance. One of the best ways to avoid missing any payments is to set up automatic payments, or have the agency directly take the payment from a bank account.
Check Credit Reports
Virginia residents should try not to obsess over their credit score, but they are encouraged to occasionally check their credit reports, especially if they know it will be relevant in their lives. For example, anyone planning on taking out a loan for a home or applying for a job that specifies there are credit checks should first look at their credit report.
After requesting a credit report, residents should carefully look over the report and not simply jump to the number indicated on their credit report. The reason it is important to look over the report is to make sure there are not any errors which are causing an inaccurate credit score. If possible, residents should compare their current credit report to old credit reports, especially if it seems like the credit score experienced a huge jump in a short period of time.