One of the most common problems most Americans face in their everyday lives is a bad credit score. While a good credit score is easy to achieve, almost 40% of Americans today are struggling to achieve good credit, while another 10% are on their way to bankruptcy and foreclosure of properties. There are many different factors that contribute to one’s credit score, and these are also the ones that should be addressed to increase the figures in a credit report.
Factors that Determine Credit Score
A person’s credit report is determined by a number of aspects, and it’s not just about the money earned and spent. Some people may be earning less than others but are in good credit, while there are individuals who earn millions each year but still end up in negative credit. But how do these results come to be?
Below are among the common factors that make up one’s credit score:
- Income. How much does a person make in a year? A person’s income, either coming from salary and compensation or through profits from his own business serve as the basis of credit, as this is where spending attitudes, loans and debts, as well as bills spawn out. It is thus important to understand the value of a person’s income in order to find ways to get out of bad credit, or maintain a good credit standing.
- Spending attitudes. Another important factor in making a credit report is the person’s spending habits. Some people spend more than what they earn, thus leading them into debt, while others make it a point to spend less in order to save for the future. Lifestyle activities such as shopping, going out with friends, and regular groceries may all contribute to one’s spending attitudes, and these can be curbed in order to improve credit.
- Debts and loans. Loans are important as they provide individuals with properties and investments both in the present and in the future, but they are also considered as debts that eat a big chunk of a person’s income. It is all right to have debts and loans, but these have to be managed properly and effectively so as to avoid getting negative credit.
- Savings. Money stored in the bank always comes in handy when working on a credit report. Active bank accounts work not only as storage for income, but as well help in alleviating one’s credit score and even save it from becoming negative. The same works for other active bank accounts.
- Bills. Also known as revolving debts, bills come on a monthly basis, and these include utilities, credit cards, installment plans other related expenses. Payment patterns in these monthly obligations are read through when working on a credit report, thus it would be great if individuals would practice making regular payments and not miss out on even just one month, so that their credit standing would be kept in stable figures.
By getting to know more about these factors, individuals would be able to find ways on how to boost their credit for the better. These factors also prove to be highly important not only because they get to improve one’s credit; they also offer better financial opportunities, not to mention a better quality of life.
What is a Good Credit Score?
When it comes to figures, a good credit score is the one that is somewhere between 680 and 850. There are a number of factors that may sum up to such score, but unfortunately most people today find it difficult to reach even the 620 acceptable credit score range.
To those individuals who fall in between the 680 and 850 good credit standing, they may enjoy better interest rates in loans, mortgages, insurance and credit cards. Hence, to get a credit score in between these figures, better payment schedules should be practiced, stringent spending habits should be followed, and current debts, loans and utilities should be managed effectively and consistently.
A good credit score does not last long however; thus it is also important to know the ways on how it could be maintained or even increased after a few weeks. By keeping a good credit score, other financial activities and lifestyles would as well be affected in a positive manner, as spenders get to use their real and plastic money with better content and fulfillment.
How to Improve Credit Score in 30 Days
While increasing one’s credit may take a few weeks or even months to fulfill, there are also a few ways to add more points to the credit report in as short as 30 days. One good way to do this is by clearing errors and mistakes present in a credit report. These errors may have a significant effect on the overall credit score, and having them removed will increase the credit rating and give individuals the points they actually deserve.
Best Ways to Improve Credit Score
The best ways to boost one’s credit score is still by effective spending management and allocation of funds. Getting to pay the monthly bills on time and not missing out on due dates provide significant changes in one’s credit report, and so does the use of hard cash instead of credit cards when making smaller purchases.
Most of all, credit scores can be improved by minimizing debts and outstanding loans. There are certain debt management methods such as consolidation so that individuals could focus on only one main loan at more reasonable timeframes and payment amounts, than be shackled to bankruptcy due to smaller but multiple debts.
Improving Credit History
Improving credit history takes a long time to build, although the results are worth it. It can be done basically by maintaining a steady balance of payments for six months to two years, as by then individuals are already expected to have most of their smaller debts paid off, altered their spending lifestyles, and are only focusing on their major, long-term loans such as auto loans, business loans and mortgage.
Most of all, credit history can be improved by continuous savings in active bank accounts as well as by making the right financial investments.