Why would improving your credit score, lower your interest rates? A credit score is a number that is representative of your overall credit history. Your actual credit score in composed of information that exists within your credit report. This includes the total amount of debt you carry and how often you pay things like your bills on time. Lenders use your credit score to determine how likely you are to repay your loan.
Credit scores can range anywhere from 300 to 850. The higher the score the better. This number will make a huge difference in determining whether you will qualify for the loan. Lenders confidence increases with the higher score that they see. This is how the higher score impacts the lower interest rate and fees. Some lenders even reduce their down payment requirements if your credit score is within a certain range.
As you can see, this number is critical for securing a lower interest rate. Here at JCAP we want to help secure a lower interest rate. Here are five ways to improve your credit score.
1. Understand The Factors That Impact Your Credit Score
Understand the factors that impact your credit score. These include payment history, the amount of debt you own and the percent of available credit used, the length of your credit history, the new accounts you open (known as new inquiries), and the type of accounts you have open.
2. Review each account and factor
Be sure to get all errors and late payment removed from your credit history. If all late payments happen to be accurate still reach out to your creditors and ask for forgiveness. If you’ve made recent steps to make all payments on time they may be willing to delete missed payments from your record. Remember, it never hurts to ask!
3. Pay down your debt
The amount of debt you owe currently is one of the top factors within a credit score calculation. Revolving accounts, such as credit cards, should be handled in a way that has you paying them off as soon as needed. Calculate your revolving credit utilization by dividing your credit card balances by your card limits. Then multiply by 100. You want to strive to keep your utilization below 30 percent. A utilization above 30 percent is harmful to your overall score. Borrowers above 30 percent can improve their score by working down their balances.
4. Apply for higher credit limits
While you are working hard to pay down your balances, consider applying for an increase in your limits. This is another way to reduce your credit utilization in conjunction with paying down debt. The two of these strategies together will help get you a bump in your score. Be careful when using this tip. An increase in credit can cause a hard inquiry on your report.
5. Use a credit-building loan
A short-term credit building loan can help borrowers build better credit. This is similar to a personal loan. After satisfying the terms of the loan, the money is given to you in a lump sum. These loan payments will show up on your history. This is a great way to improve your score and prove to lenders that you will be faithful on repaying your loan. It will also help you secure an overall lower interest rate.
How Can JCAP Private Lending Help?
JCAP Private Lending is a Direct Lender who closes and services Investor Funded Short-Term Real Estate Loans. Our experienced team has been providing quality mortgage services for over 30 years. JCAP Private Lending is an Asset Based Lender who steps in to quickly solve a short-term financial need secured by Real Estate. JCAP has an innovative approach to lending: focusing on speed, simplicity, and safety for borrowers and investors. JCAP’s operating philosophy is simple – “We Care & We Serve”