Unlock Financial Freedom: Time-tested Methods for Raising Your Credit Score and Getting Approved for Mortgages and Loans
Overview
Imagine that you’ve located your ideal house and are prepared to submit a mortgage application. Everything looks ideal. That is until your credit score causes your loan application to be rejected. Your initial joy quickly gives way to annoyance, and you ponder how a seemingly insignificant number could have a significant effect on your future financial situation.
Your credit score is more than simply a number—it measures your creditworthiness. It’s a factor in getting authorized for loans, mortgages, and even credit cards because lenders use it to assess your creditworthiness. While a low score may restrict your financial alternatives, a good score increases your chances of obtaining favorable loan terms.
The favorable tidings? There are changes to your credit score. You can strengthen it and increase your chances of being granted the necessary financial possibilities by taking the appropriate actions. We’ll lead you through doable, practical ways to raise your credit score and ensure the financial future you deserve.
Recognizing Your Credit Score
It’s crucial to comprehend your credit score before learning how to raise it. A three-digit figure that indicates your creditworthiness is your credit score. In Nigeria, credit ratings vary from 300 to 850, with higher numbers indicating better creditworthiness.
The following variables are used by credit scoring organizations, such as CreditRegistry or CRC Credit Bureau, to determine your score:
1. Payment History: Making up around 35% of your credit score is the most significant factor. It shows whether you’ve paid off credit cards, loans, and other bills on schedule or not.
2. Credit Utilization: This represents the percentage of your available credit that you are utilizing, and it makes up about 30% of your score. Your score will improve if your credit use is lower.
3. Length of Credit History: Approximately 15% of your score is determined by how long you have had credit accounts open. Reliability is demonstrated by a longer credit history.
4. New Credit Inquiries: Your score may be impacted by the inquiries that are generated each time you apply for new credit. An excessive number of questions in a brief amount of time can reduce your score by 10%.
5. Credit Mix: Having a range of credit kinds, including mortgages, personal loans, and credit cards, will help you get higher credit ratings. The remaining 10% of your credit score is composed of this.
Let’s look at some concrete actions you can take to raise your credit score now that we understand how it’s determined.
How to Raise Your Credit Rating
1. Frequently Review Your Credit Report
The first step in boosting your credit score is recognizing where you currently stand. Get a copy of your credit report from CreditRegistry or CRC Credit Bureau, among other credit bureaus. Check it for any mistakes that might be hurting your score, such as false account information or fraudulent activities.
File a dispute with the credit bureau to have any errors fixed if you discover any. One of the easiest methods to see an increase in your score is to clean up your credit record.
2. Make On-Time Bill Payments
On-time bill payments are essential because your credit score is primarily based on your payment history. Missed or late payments hurt your credit score and are recorded on your record for a long time. Set up automated payments or payment reminders for recurring bills, such as credit cards, loans, or utility bills, to prevent this.
If you’ve missed payments in the past, don’t panic. Focus on making on-time payments moving future. Regularly making your payments on time will raise your credit score over time.
3. Cut Down on Credit Card Amounts
A credit score is based on 30% of credit usage, or how much of your available credit you are utilizing. Lenders may conclude that you are overextending yourself financially if you are utilizing an excessive amount of your available credit.
Try to maintain your credit use below 30% to raise your credit score. Try to maintain your balance under ₦150,000, for instance, if your credit limit is ₦500,000. To prevent paying interest and keep your credit usage ratio low, try to pay off your credit card debt in full each month.
Prevent Creating an Excessive Number of Credit Accounts
Opening new credit accounts to increase your available credit could be alluring, but doing so can have unintended consequences. Every time you ask for credit, your credit report receives a “hard inquiry,” which may temporarily reduce your score.
Lenders may perceive you as a riskier borrower if you open an excessive number of accounts quickly. Rather than pursuing more credit, concentrate on handling your current accounts with responsibility. Long-term, this will have a more favorable effect on your credit score.
5. Continue to Use Old Credit Accounts
Closing previous credit accounts may hurt your credit score because your credit history accounts for 15% of your total score. By raising the average age of your accounts and assisting with your credit use, an old credit card can still have a favorable impact on your credit score even if you are not using it.
Consider leaving an old account open and utilizing it sometimes for little purchases instead of closing it if you’re inclined to do so. Just make sure to pay off the bill in full each month to prevent excessive interest charges.
6. Vary Your Credit Combination
Lenders prefer to see that you can safely handle a variety of credit types. Your credit score can be improved by having a combination of installment loans, such as mortgages or vehicle loans, and revolving credit, such as credit cards.
To diversify your credit mix, do not, however, simply take on additional forms of debt. Applying for new credit should only be done if it makes sense for your budget.
7. Engage in Debt Negotiations
Consider your options before letting your account go into default if you are having trouble making your payments. Speak with your creditors to arrange a payment schedule or to request lower interest rates. If you’re proactive, a lot of lenders are ready to work with borrowers to establish a more affordable repayment plan.
You can lessen the bad effect on your credit score and prevent missing payments by speaking with your creditors.
8. Handle Credit Carefully
Being able to consistently exhibit appropriate credit conduct is one of the most crucial elements in raising your credit score. This entails avoiding needless debt, maintaining a low credit utilization rate, and making on-time payments.
It takes time to establish and maintain a high credit score, so be persistent and patient. Your credit score will rise significantly with proper credit management over time.
The Advantages of a High Credit Rating
A high credit score makes it possible to take advantage of numerous financial opportunities that can raise your standard of living. The following are some main advantages:
– Better Loan and Mortgage Rates: If your credit score is higher, you get loans and mortgages at cheaper interest rates. This saves you thousands of naira over the life of the loan.
– Higher Approval Odds: If you have a high credit score, lenders are more likely to approve your loan or mortgage application. You now have greater financial freedom to make large purchases.
– Larger Credit Limits: Lenders may provide you with a larger credit limit if your credit score is high enough evidence that you can responsibly manage credit.
– Greater Negotiating Power: In negotiating loan terms or interest rates, a good credit score offers you clout. You can compare prices and negotiate the best possible terms for your finances.
In summary
While raising your credit score takes time, you can improve your financial situation and make steady progress by adhering to these guidelines. A strong credit score is essential to access these options, whether your goal is to be eligible for a personal loan, mortgage, or just additional financial flexibility.
Recall that maintaining consistent, prudent credit conduct is the first step toward improving your credit score. Over time, your credit score will rise if you pay your bills on time, control how much credit you use, and pay attention to any new credit inquiries. Additionally, a higher credit score can open up more favorable financial options for you, result in cheaper interest rates, and help you reach your long-term financial objectives.
Begin now to see how your credit score can rise and lead to a better financial future. Check your credit report and make a payment schedule.