When a borrower wishes to secure a new loan or take on additional debt, he should attempt to raise his credit score quickly to qualify for the lowest interest rate and best payment terms. The higher a borrower's credit score, the better the terms offered by the lending institution. A few simple changes can quickly raise a credit score.
Check Your Report for Errors
Through a free service such as AnnualCreditReport.com, a borrower should check all three credit reports (TransUnion, Equifax, and Experian) for errors, because the credit score is based on information in the reports. If there are errors, he should immediately contact the credit bureau through its website. Federal law requires the company to respond within 30 days. A free credit report typically does not include the actual credit score, which may be purchased for a fee.
Pay Down Lines of Credit
One part of a borrower's credit score is credit utilization. Lines of credit and credit cards with balances close to their limits---also called maxed-out credit---negatively impact a credit score. To quickly reduce this negative impact, a borrower should pay down lines of credit and credit card balances to less than 30 percent of the credit limit.
Pay Off Negative Items
Negative items including collections, judgments and liens weigh down a credit score and should be paid in full. Paying off these items does not remove them from the credit report, but it does lessen the impact on the score. Additionally, the borrower may be required to pay in full some of these items prior to closing on a new loan.
Avoid Late Payments
One of the best ways to bolster a credit score is always to make monthly payments on time. Automatic drafts from a checking account for each monthly bill will preclude delinquencies and late fees. All payments should be current prior to application for a loan.
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