Your credit history is very important, it determines what loans you will qualify for and what type of interest rate you will pay. Bank lenders are able to obtain your credit history by getting hold of your credit score.

What is a credit score?

So what is a credit score you ask? A credit score gives lenders the chance to look at your spending history and distinguish whether or not you are suitable for a loan. It gives lenders an indication of how your spending habits are and how likely you are to meet your loan repayments. So the concept is easy really, the better your history, the more attractive you become to loan companies.

What guidelines does the industry follow?

The better your credit score the better rates you will get on a loan.
If you have a low score this does not automatically disqualify you.
As your credit information changes, your score changes.

Do I need perfect credit?

You need to remember that lenders are not looking for customers with perfect credit, it is not something they expect. If you have reached a point in your life where you feel like you’re ready to take the next step for example buying a home instead of renting then there are options aimed specifically at first-time homebuyers.

How can I improve my credit?

There are a number of ways to improve your credit score, one is through credit counselling or money management companies. These are non-profit companies that are aimed to help those who have problems managing their income.

So, how can you figure out if credit counselling is suitable for you? Credit counselling is fundamentally learning about the steps you should be taking in order to guide us through the difficult times in our financial lives.

Credit counsellors often work with both you and the lender to come to some sort of resolution. Most lenders are happy to do this as they receive back their owed money in a suitableway.

Here are the main steps to take if you wish to improve your credit score:

Cut back on unnecessary expenses and save the money you would have otherwise spent.
Use saved money to pay your debt off.

Pay off and close credit card accounts whenever you get the chance to.

By paying off your debt, your credit score will improve within a few months. You should keep certain goals in mind and constantly monitor your credit situation and you’ll be well on your way to improving your credit score.

Sam is a content executive for PPI Refund, she is a dog loving, baking fanatic and horror film nerd with a passion for sharing her suggestions and tips with a wider audience.

How to Get a Desirable Credit Score?

Have you been contemplating of applying for your very first home loan? Your cash on hand exceeds what you need. You have already spotted the right mortgage plan that meets your preferences. It will have no effect against the expenses and fees you are obliged to pay on time. Everything is set to go, but have you checked your score – the credit score?

We thought getting a perfect score only resides inside the four corners of a classroom. However, once we enter the “real world” the scoring doesn’t stop after we got our diploma or earn a degree. A credit score is a kind of score we must maintain at its highest all throughout our lives. A poor credit score could prevent someone to buy a new home or new car. It could lower the chances of being hired or opening a savings account. Can you see how much damage a mere credit score could affect you in terms of venturing on any financial undertakings?

A credit score is not just a “mere” score you could easily take for granted. It serves as a barometer of your credit worthiness. It reflects how many loan approvals you could get from various banks, lenders, and credit unions. The most commonly used is the FICO^® (Fair Isaac Corporation) Score, which is a three-digit rating with the ff. criteria:

• 35% = Payment History
• 30% = Amounts Owed
• 15% = Length of Credit History
• 10% = New Credit
• 10% = Types of Credit Used

The score ranges from 300-850. Unfortunately, the basis of your score is not by passing an exam but through real life situations. What actions one must take to achieve a perfect or high credit rating? You should:

• Handle your finances well. Always pay your dues on time. Avoid late payments as possible.
• Monitor your credit limit. Never exceed and avoid being an impulsive buyer. Handle your spending habits wisely.
• Avoid at all costs being in the “Hall of Delinquent Accounts” of a Collection department. Aside from the Collection people constantly breathing on your neck, it is an indication you are a delinquent client and therefore can’t be trusted.
• Establish a mature financial history. The longer you’ve been a responsible borrower, say, counting in years, the better.
• Have a healthy mix of accounts. Healthy in a sense your payments are on time. While a mix of accounts means you’ve managed acquiring, for example, a variety of loans such as mortgage, auto loan, insurance and credit card.
• Don’t default on your loan. If this happens, it means you’re not financially sound. Banks or lenders may perceive you an unfit candidate and not capable of fulfilling your credit obligations.
• Keep your credit file void of any negative reports. The big words to be wary of would be bankruptcy, liens, complaints, foreclosures and getting a judgment.
• Keep the number of your credit cards in check. Don’t fall into a habit of applying for a new credit card in a frequent manner with short time intervals.

Now, you are aware how to get a better score, the next step will be checking it out. Are you ready to know how you faired these past few years? You could get your credit file from the three major credit bureaus like Equifax, Experian, and Trans Union.

How to Improve Your Business Credit Score If You’re Self-Employed

According to the Pew Research Center, nearly 15 million Americans were self-employed in 2016. That amounts to more than 10% of the entire workforce. Those self-employed individuals employed an additional 30 million workers, taking the total number of Americans either self-employed themselves, or working for someone who is, to almost one third of the workforce.

The Pros and Cons of Self-Employment

The benefits of self-employment are obvious to those who choose this route—from escaping the daily 9 to 6 grind to working at their own pace to establishing their own work schedules. Unfortunately, self-employment can be a problem when you’re trying to secure a mortgage loan or obtain a credit card.

Self-employed workers face added scrutiny, primarily because they don’t have a steady paycheck and therefore have a harder time establishing financial stability. With their incomes up one week and down the next, the self-employed are sometimes considered a greater financial risk, which credit agencies sometimes penalize with lower credit scores.

On the other hand, there are millions of self-employed individuals who are able to secure mortgage and other kinds of loans, and to obtain the credit cards they require for their personal and business needs. If you’re self-employed, there are several proactive steps you can take to prove your creditworthiness. Here are 6 strategies which will help you maintain strong credit and obtain a personal or business loan:

1. Save Those Financial Documents

What credit agencies and mortgage lenders want to see is stability—one of the reasons they tend to like steady salaries—but the self-employed can demonstrate financial stability by maintaining complete and accurate records of all financial documents, certainly including all tax returns. If you tend to be a little disorganized yourself, hire a bookkeeper with whom you can set up regular reporting and monthly check-ins.

It’s also a good idea to take the last two years of earnings (lenders generally want to see a minimum of two years worth of financial documentation) and calculate an average monthly income figure. This is something you can show potential lenders to demonstrate stability. Obviously, your financial history will look stronger if you made more money in the months leading up to your credit or mortgage application.

2. Have Financial Reports at the Ready

Financial reports provide the kind of detail lenders appreciate because they help project future earnings. Among those you should maintain and be prepared to show are:

• Earnings statements: this includes gross revenues from self-employment for the past 1 or 2 years. It typically doesn’t include expenses, refunds or inventory.
• Expense reports: this includes all business expenses, typically for the past few years. Include big-ticket items like new equipment. Be sure to attach any proofs of purchase and receipts.
• Profit and loss statement: this combines the data in your earning statements and expense reports, providing lenders a more comprehensive picture of your creditworthiness.
• A balance sheet: this includes all assets, liabilities and capital investments. This helps lenders get a better sense of your net worth.

3. Make Sure You Have a Strong Credit History

It would be a waste of time to get all your financial documents ready for review, but not to do the things you would normally do to establish good credit, like paying off credit cards on time. Remember that your credit score is calculated along several key factors and may include but isn’t limited to:

• Your payment history
• How much you owe
• The length of your credit history
• New credit
• A good mix of credit accounts

You should check your credit score regularly to ensure there are no mistakes and try to keep debt utilization to no more than 30% of your credit limit.

4. Be Prepared to Share Some Strong Referrals

Especially when the decision to lend or not is close, strong referrals can push you over the finish line. Strong referrals who can attest to your financial stability, financial background and character would include former employers and any influential contacts you have. Be sure to continually nurture all of your business networking relationships to maintain a number of key referrals who can reinforce your reputation for honesty and creditworthiness.

5. Be Willing to Pay a Higher Interest Rate

Even when you have all your ducks in a row, some lenders will consider you a higher financial risk simply because you are self-employed, and for this reason offer a loan at a higher interest rate. Obviously, no one want to pay more for a business or personal loan, but doing so can actually be advantageous for the self-employed over the long haul.

For one thing, in exchange for accepting a slightly higher interest rate, you’ll be able to secure the mortgage loan you need, or the business loan financing which will help you grow your business. For another, the loan you take will help you establish a solid payment history to boost your credit rating. Finally, that improved credit rating means you’ll have an opportunity to refinance your loan at a lower rate in the future.

6. Be Aware of What Could Impact Your Credit Score

You should be aware of things that are bad for your credit score and set in place policies and monitor to maintain the best score possible.

Conclusion

Being self-employed does mean that you might have to work a little harder to persuade lenders that you are creditworthy. The good news is that there are proactive measures you can take to substantially increase the odds that lenders will view you as a good risk for both business and personal loans.

Use the same skills which help you succeed in your business to succeed with prospective lenders. Stay organized, do your homework, maintain accurate records, pay your bills on time, and be willing when necessary to make temporary financial accommodations to achieve your long-term financial goals.