Your Credit Score and its Effect on Securing Personal Loans

Your credit score is based on your credit history as reported to the credit bureaus by the companies who have loaned you money. If you’re always on time with your payments, and follow a few other simple rules, you’ll have a good credit score, which will not only make it easy for you to secure personal loans, but will allow you to get these loans at lower interest rates.

Here are ten tips to improve your credit score so that you’ll not only be able to secure a personal loan, but also get the best deal possible.

Ten Tips To Improve Your Credit Card Score

1. Always pay your credit card statement on time. This is the single most important thing you can do to ensure that you maintain a good credit score. I have my credit card set up to make the minimum payment automatically so my payment is always received on time. I typically pay off the balance monthly too, but I don’t have to worry about the timing of these payments.

2. Avoid carrying a lot of credit cards with small balances. These hurt your score. Don’t cancel them, because that can hurt your score too. Instead go to tip 3.

3. Increase the limit on your main credit card. The higher your limit, the better.

4. Here’s an easy way to increase the limit on your credit card. You know how your credit card company is always calling to offer you a cash advance with a low rate (for the first few months at least)? Next time they do, say OK, but only if you’ll raise my credit limit by the amount of the advance. They’ll ask why, and you can just say you’re thinking of making a major purchase with the card. When you get the advance, just pay it back. You’ll have increased your limit by its amount.

5. If you have defaulted on a loan but wish to pay it back and fix your credit, make it a precondition of you’re paying the loan off that the default be removed from your credit record. You’ll have to deal with someone fairly senior to do this, and you’ll also have to tell them that the default was the result of an error (this error can be characterized very loosely, it’s just to provide the basis for “correcting” your credit record).

6. Own your own home. Easier said than done, I know, but it will help your credit score.

7. Be an employee rather than self-employed. One of the benefits I experienced from incorporating my business is that I instantly became an employee of it, which made it easier to get personal loans, and improved my credit score. Weird, but that’s how credit works.

8. If you have to choose which bills to pay, pay the ones that will show up on your credit report first. For example, pay your Visa minimum payment before your mortgage in a pinch. Sounds counterintuitive but a late mortgage payment won’t show up on your credit report, a late credit card payment will.

9. If you’re not working, don’t let your working spouse finance everything in their name. If for example, you buy a car it should be bought in your name, and the financing should be in your name, even if your spouse has to co-sign. In this way you’ll build up your credit score.

10. Check your credit report to ensure there are no mistakes on it prior to applying for a personal loan. The time to fix your credit report is before you apply for the loan.

If you follow these ten tips to improve your credit score you’ll not only be able to secure that personal loan, but you’ll get the lowest interest rate available.