A range of factors are covered by each category, which affect an individual’s overall score. The fastest way for increasing credit score is to achieve simultaneous improvement in all categories. With a solid plan that includes the following steps, an increase in credit score becomes a very realistic aim for people:
1- People should make it a habit to pay more than their minimum amount on credit accounts. This is because, apart from the interest charges, paying only the minimum due means that people will spend the next several years paying off a credit card balance that’s not more than $5000, even if they don’t make another purchase. In addition, minimum payments give the wrong impression to lenders. They make you appear as unable to afford your existing debt. Therefore, people should pay twice the minimum amount.
2- The number of inquiries should also be reduced. Each time an individual applies for a credit card, loan or bank account, it will go in their credit history. Inquiries also take place when late payments are noted by current creditors. You will appear to be a bad credit risk to lenders because of too many inquiries. Payments should be made timely and judicious applications should be made for additional credit to avoid excessive inquiries.
3- The debt to income ratio should be calculated. All payments, fixed debts and credit card obligations should be added and the total should be divided by gross monthly income. Credit lenders consider a ratio high if it’s greater than 36%.
4- This debt to income ratio should be decreased. This ratio is calculated by creditors for evaluating one’s credit worthiness. Mortgage companies, especially, use this particular ratio in the case of first-time home buyers.
5- Make it a habit to make timely payments. If you are unable to make more than your minimum payments each month, don’t forget to do so on time. Creditors will make note of late payments and they will also have an impact on the credit report. They will force people into the high-credit risk and high interest rate profile.
6- Credit reports should also be monitored to see if they contain accurate information and there are no discrepancies involved. These reports can be obtained easily free of charge for making any changes.