Easy Steps to Improve Your Credit Rating

Rating

Bad scores, without a doubt, can be costly and stressful. It is the poor financial decisions such as auto loan, mortgage plan, low balance, or overspending is what may affect your credit scores.  Building good credit scores is one way you can do to stabilize your credit rating. Plus, it is crucial to avail credit card rewards, borrow money, and access products and services such as loans.

No matter how worse the situation might seem, poor credit rating doesn’t last forever if you take precautionary steps to improve your credit scores.  That means credit rating is basically a reflection of credit history. It changes when new information or scoring is added to a credit report.  And when you start handling your credit scores efficiently and more responsibly, the rating improves.

If you’re looking for some effective steps to raise your credit scores, we have you covered here. But before that, let’s clear our understanding of what a credit score is and how you can check it.

What is a Credit Score?

As mentioned above, credit scores are created from the rating held in a credit report that is also called a credit file.

Your credit score number can be different for different products, even if they are from the same loan company. It primarily depends on criteria that are used for assessing your credit file as a customer. The information sourced from your credit report is often used to decide:

  • Whether to borrow you or not?
  • How much interest should be charged from you?
  • How much can you borrow?

The recent the file is, the greater the impact it will create. Lenders, banks, or loan companies are more interested in the current financial state of the filer. That means your financial decisions of the past six years, whether good or bad, must be on the record.

 If your credit file shows an inconsistent payment record, the lender can charge you higher interest. You might not be considered an eligible candidate for loans. Your missed payment record can raise the concerns of your lender, and he/she might consider lending you money is of high-risk.

Moreover, your credit record or credit history affects your ability to qualify for insurance deals or cell phone contracts. That is what makes checking your credit file regularly extremely important if you want to avoid any mistake or fraudulent activity in the report.

How Can You Check your Credit Card Score?

The three credit bureaus TransUnion, Equifax, and Experian, create credit reports. To receive your credit rating online, you can send a request to these scoring agencies. The online service is free and sends you the softcopy of credit file via email.

Use Credit Score Membership

You can also subscribe to the membership of these credit score agencies. Subscribing them allows you to get updated information on your credit report.  Plus, some of these agencies enable you to access their agents who look into your credit report.

If you’re on a free trial, make sure you cancel the membership to avoid monthly subscription charges.

Open a Fair Credit Rating Credit Card

You can compare credit card promos all in one place for different types of programs and rates that will provide you with different credit rating requirements that might fit your credit score and can apply online and get instant results after applying.

Steps to Improve Your Credit Scores

Step: 1- Get Your Credit Report

 Getting a copy of your credit report is the first step you need to take for improving your credit scores.   Determining the status of your credit rating will help you find out what exactly needs to be fixed.  As mentioned above, your credit score is based on your credit record information, so you need a copy of it to identify the account you need to work on.

Step: 2 – Pay Your Due Bills

The next step is to check your payment history. It makes 35 percent of your credit rating, which is more than other factors. If you’ve a history of paying your bills late, it may affect your credit score. Make sure that you start paying your due bills.

 Remember that each on-time payment will update positive information in your credit report.

Step: 3 – Dispute Credit Report Errors

You can’t avoid errors when it comes to generating credit reports. It is always better to review and assess your credit report closely for the following:

  • Any fake accounts on your name
  • Wrong credit limit and data in your account
  • Social security numbers and accounts that are not yours
  • Addresses of the places you have never lived
  • Negative information; late payments ( if there is a payment older than seven years in your credit report, it is illegal)

In case you find of any error listed above, immediately report to three credit bureaus to dispute the errors.  Visit the Federal Trade Commission (FTC) website to find detailed steps for error correction.

Step: 4 – Pay Your Due Credit Balance

Loan companies heavily scrutinized your debt amount for your credit rating.  Three major factors that are analyzed are:

  • Total debt owed
  • Accounts with no due balances
  • Amount of available balance or used  credit

Your total available credit is compared to reported debt to determine the debt-to-credit ratio. The best way to keep debt amount low is to pay it as much as you can.   Don’t consolidate your debt on one low-interest card. Plus, avoid credit inquiries and applying for new credit cards until your old credit balance is paid off.

Step: 5 – Use Your Credit

It is important to use credit regularly as a creditor to keep your credit report updated and accurate. While debit cards or cash payments may seem budget-friendly options, a cash-only lifestyle doesn’t improve credit rating.

Using your credit with a credit card is the best way to do it; especially when you’re trying to raise your credit rating to qualify for a loan installment.   If you haven’t used your old credit card for a long time, you may start using it. Reactivating a dormant account can be advantageous for your credit scores.

Final Thoughts

Overall, good credit scores come with several benefits, and by following these simple steps, you can easily improve your credit scores.  Monitoring your credit report is a key to keep tabs on your account activity, plus make sure you pay your balanced payments and credit to maintain a good reputation to qualify for the rewards and other benefits.

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Does the Business Credit Card Affect Personal Credit Scores?

If you are trying to keep your startup finances separate from personal finances, you might be disappointed.  It is because the effects of your business credit card often show up on your personal credit score. Even if your business faces hardship or goes through any rough patch, it might affect your personal credit score.

That is to say, eliminating your all personal liabilities with your business credit cards is not possible as they need personal guarantees. However, if you‘re a startup, you can use a credit card that does not report your account activity to credit bureau to limit the risk. It may be one of the safest ways as some business credit cards don’t report to consumer credit bureaus but commercial credit bureaus. Also, there are credit cards that do not report a customer’s monthly payments.

But these are limited options. No matter how helpful your business credit card has been in building credit for your business, it does affect personal credit scores or credit history.

Luckily, there are some ways entrepreneurs use to minimize the risk factors related to their business credit cards and help personal credit scores instead of hurting them. Before exploring those ways, let us take a look at how business credit cards can affect your personal credit scores.

Effects of Business Credit Cards on Personal Credit

Typically, the following are the ways that can affect your credit score if you apply for or use a business credit card.

1. Credit Inquiry on Applying for Credit Card

 It is important to know that when a business owner applies for business credit cards, the card issuer considers both his/her personal credit card history and business track record. This may include investigating or checking personal credit, which may affect credit by dropping a few points in the scores.

This is one of the reasons many business credit card bureaus require a personal guarantee on applying.   That means if a business defaults on its payments, a business owner can be held liable to pay all the debts.

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2. Utilization of Ongoing Credit

Most of the banks and finance institutes report all account activities to the consumer credit bureau (Experian, Equifax, TransUnion) that includes the ratio of credit utilization of a customer. The credit balances are divided by the total amount of credit limits a user has. That means if you obtain the high balance on a business credit card, it can negatively impact your personal credit card scores.

According to credit experts, it is better to keep your credit card utilization below 30 percent. It makes your business credit cards easy to handle as they come with a high credit limit as compared to a consumer credit card. Plus, if you are planning to make a big investment in the business, it is better to apply for a loan than using your business credit card for it.

3. Reporting Delinquency

As mentioned earlier, some credit card issuers do not report monthly account activities of their customer to the consumer credit bureau. However, they may report your account if you don’t make your payments consistently.  Late payments are reported if they are delayed more than 30 days. If becomes a pattern, the negative marks do not only affect your personal credit card scores but also stay up on report for seven years.

A delinquent account is, without a doubt, an important thing to consider when it comes to improving payment history or personal credit card scores. Poor account scores or default account affects your ability to apply for loan affordable. Plus, late payments can trigger an APR penalty that can go up to 29.99 percent with some business cards.

Business Credit Card Issuer Policies that impact Personal Credit Scores

Although all credit card issuers have different policies pertaining to credit card activities, they might report the business information to credit bureaus on the same issues. It is always worth checking the policies.

  • Barclays:  may report in case of inconsistent payment record
  • American Express:  if your account doesn’t have good standing, it may report
  • Capital One: report all account activities
  • Citi:  doesn’t report account activity
  • Bank of America:  reports delinquent account
  • S.Bank:  doesn’t report account activity
  • Chase: reports when an account is delinquent more than 50 days
  • Well Fargo:  doesn’t report account activity

How to Use Your Business Credit Cards to Build Personal Credit

If you are concerned or apprehensive about the impact of a business credit card on your personal credit   scores, there are ways you can use to minimize the effects.

All you need is to practice poor credit behaviors with both your consumer and business accounts.  

Here are some of them:

Make Payments on Time

Your payment history plays a major role when it comes to building credit score or improving credit history.  It is important to pay at least half of your monthly payment on time, if you want to solidify your credit scores. Paying off the full balance each month is extremely helpful in avoiding interest entirely.

Keep Credit Balance Relatively Low

Keeping a low credit balance is always a good move as your credit utilization has a great impact on your credit scores. You can achieve it by making fewer payments through your credit cards or keeping the credit low.  In case your credit use spikes up in any month, you can manage the score by paying down the balance to help your utilization ratio come back to normal.

Use your Credit Card Wisely

There is no denying that business credit cards are a  good option to make payments for your operating expenses. But if you want to finance equipment or inventory, paying with a business credit card is harder.

 What is more, it may increase interest rate with any business loan you take.  That is why it is important to consider all your options first before you choose to make payments with your business credit cards.

Final Thoughts

In a nutshell, getting a small business credit card is a good idea for making payments, it is essential that you understand how it affects your personal credit score.            

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