Whilst a payment that is just a few days late may only lead to an unwelcome bank charge, paying more than 30 days late will result in a credit score fall of up to 80 points. Filing chapter 7 bankruptcy not only leads to a fall of about 150 points, it shows on a credit report for the next 10 years. Before applying for finance, building better credit scores is essential. Whilst credit rating repair only involves a few subtle changes for some, others will need to perform considerable work to rebuild credit ratings. Much depends upon the severity of the transgression as to how long the repair process will take.
Building Better Credit Scores By Paying Down Debt
Up to 30% of a FICO credit score is made up of the amount that person owes. Owing too much money relative to income will lead to credit rejection. Easy credit approval is granted to customers whose debts are sustainable as they are less likely to default.
- If any savings are available, use this money to clear secured and high APR debt. This not only raises credit scores, it is also more prudent.
- Avoid maxing out credit cards as this causes scores to fall by an average of 10 to 30 points. People with excellent credit rarely use more than 30% of their allocated credit limit. It is better to spread debt over several cards to keep them under 10%.
- Get a loan from a friend or family member to eliminate debt.
Avoid Making Late Payments to Rebuild Credit Ratings
Whilst paying a few days late will lead to a bank charge, missing the full 30-day repayment cycle will reduce a score by about 70 points. This indicates the importance of repaying debt punctually. It is worthwhile considering making payment automatically, especially for those who lead a busy lifestyle.
- Each punctual debt repayment will lead to a slightly higher credit score so always try to pay back loans, mortgages and credit card debt on-time.
- If no active agreements are available, it is worth signing-up to a guaranteed credit card. It not only offers easy credit approval, but helps ensure better offers in the future.
Easy Credit Approval When Cards Are Used More Often
An obsolete card is not only wasteful of that person's allocated credit limit, it also has implications for personal credit. Consider the following suggestions:
- If no credit card ever has more than 30% debt on it, consider closing it.
- If more than 30% of the credit limit is used, spread unsecured debt across the full spectrum of available cards. Using old cards will result in a small credit improvement.
Best Way to Improve Credit for Easy Credit Approval
Rebuilding credit doesn't happen overnight, but avoiding many of the more common pitfalls will help to gradually repair bad credit. It is important to check for credit report errors, reduce indebtedness and always pay back debt punctually. Avoid making too many applications for loans, credit cards and mortgages. If this is achieved, approval for credit will be granted by more lenders.
Sources
Pulliam Weston, Liz. (March 10, 2010). "Raise your credit score to 740." MSN Money.
Pulliam Weston, Liz. (Nov 11, 2009). "5 ways to kill your credit score." MSN Money.
Asa Ghaffar - Asa has over 10 years of practical experience in loan approval, secured lending, bad credit repair, stock trading and debt management.
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