Credit scores will matter even more in 2016 than they did in 2015. With the economy threatening to see interest rates rise, lenders are going to place more weight on this score than ever before. Don’t be left behind or you could find it impossible to obtain any type of loan. Those who already have bad credit are in the most vulnerable position. We’re going to show you how to turn your credit around in 2016.
Figure Out Your Budget
To begin with, you must figure out your incomings and outgoings in a normal scenario. In other words, take your salary and your conventional household bills. Only then should you add on your debts. After that, look at whatever you have left. You have to change your budget until you can at least cover the repayments on your outstanding debts. Paying your bills at the right time is the cornerstone of any credit score. It accounts for at least 30% of the whole thing, which is by far the biggest proportion.
Total Credit Limit
For each credit card you have, figure out what 35% of your total credit limit is. You must never go over this magic number. In the eyes of credit card companies, anyone who is using more than 35% of their total credit limit is in trouble and is relying on the money of others to get by. There may be some truth to this, but whether you agree with it or not you must get your credit card debt below this percentage for each individual card.
Longer History Trumps All
The longer your credit card history the better, even if you’ve barely touched the account in years. You can technically have a credit card that you haven’t used in years and it will contribute to a positive score. Even if you intend on never using certain cards again, cut up the card but leave the account where it is.
Closing an account can actually reduce your score. This is usually caused when your total available credit goes down. Another thing to be cautious of is to not have too many personal loans. Often times people with bad credit take out several personal loans to help pay for things they don’t need. Personal loans are fine just as you are responsible with them.
So many people don’t request a copy of their credit records when they get into a situation where they have to review their credit. You would be surprised at how often the major credit reporting agencies make mistakes. There are people who have completely altered their financial prospects by correcting the mistakes of others.
Reduce Credit Enquiries
Making enquires for new cards and loans will stay on your record for two years. For one year, it will reduce your score. A rejection makes it even worse. It’s an interesting line of thinking because applying for credit is bad, but so is not having any credit at all.
In short, only apply for the lines of credit you believe you have a good chance of being accepted for. Furthermore, you should make an effort to not apply for too many cards in a short space of time. Try to space them out as and when you need them. Hopefully, these tips will help you turn your credit around in 2016. What other tips do you have for a better credit score?