Tips for Fixing Your Credit Score before Applying For a Loan

More than 30 million people in the United States have credit scores that make obtaining loans and credit cards with reasonable terms difficult. A bad credit score means you will pay more for loans. The better your credit the lower the interest rate you can secure on mortgages, loans and credit cards. Here are some guidelines to help fix your credit score:

Get your credit card balances below 30% of the credit limit of each card. Pay off the cards closest to their limits first. Your credit score will increase if there is a large gap between the amounts of credit you have available to you and the amount you are using. Use your credit cards lightly.
Once all of your cards are below 30% of their limit, focus on paying off the card with the highest interest rate first, and make the minimum payment on all of your remaining card.
Check your available credits from each lender. Contact them for updated information to make sure your limit is accurate.
Use some older credit card every few months or so to keep these accounts active. Charge even a small amount and pay it off in full when the statement comes. The older the credit history the better for you. One of the factors considered when calculating your credit score is the length of time you have had credit established with each creditor. Do not close old accounts as this can hurt your credit score as it limits the total credit available to you. Keep the cards you do not use in a safe place and forget about them.
If you have typically been a good customer, you can ask a lender to remove a late payment from your credit history. Make the request in writing. You have a good chance if you have a good record with the company.
The most important factor in determining your credit score is your payment history. Avoid skipping payments or late payments. Consider automatic payments from checking accounts or online bill payment services.
Minimize credit card applications. Each time you apply for credit, a lender requests to view your credit report. This inquiry is noted and can reduce your credit score. For that reason do not apply for unnecessary credit and if you are planning to take out a loan, avoid credit applications for 18 months prior.
Check your credit report for any errors such as accounts that do not belong to you or paid accounts that are still showing a balance. To correct any errors, contact all three credit bureaus to dispute the information. Having inaccurate information corrected can increase your score and the information can be removed within 10 to 30 days of a dispute.
If you are applying for a loan soon, consider transferring some of a large balance credit card to other cards to even out the percentages of available credit on each card. But before you adopt this strategy, calculate the interest you will be paying and compare interest rates between cards to make sure this is a wise option. Before the loan application, also try to avoid using your credit cards for a few months to temporarily boost your credit score.
If you have a lot of high interest debt troubling you, you can work with a non profit agency such as Consumer Credit Counseling Services to set up a debt repayment plan. These services can help you negotiate lower interest rates and help you pay off your bills. Most credit counselors offer services through local offices, the internet or on the telephone.

Any steps you take now can make a positive effect on your future. Credit scores place the most emphasis on information reported within the last 24 months. So even if you have a bad credit score now, it will not affect you forever if you work on improving it now. Improving your score even by a few points can make the difference between the best loan rates and sub-prime loan rates. Repairing your credit is something you can do by yourself but there are credit counselors, financial planners and accountants that can assist you in managing your finances and credit.