How to Tighten Up Your Credit Before You Apply

Your Credit Score is compiled of five different categories based on very complex calculations to determine your creditworthiness. If you tighten up your credit before you apply, then you will save yourself a lot of money on long-term interest payments. Your credit score will impact your ability to have another credit card, mortgage, secured or unsecured personal loans.  Here are some tips on how to tighten your credit before you apply.

Understand Banker Mentality
When you go into a bank or financial institution, the loan officer will be doing everything he can to determine how “creditworthy” you are. He will consider your income, assets, character and credit capacity. In order to receive the best loan with the lowest interest rates, you will need to demonstrate that you have the ability and character to repay the loan. Banks are more hesitant to loan having had their balance sheets destroyed in the banking crisis, so it’s important to understand where they are coming from.

Pay Off a Portion of Your Debt Loads
The complex world of credit rewards those who have “plenty of space on their revolving loans.” One of the primary mistakes of a debtor is to completely pay off and cancel an entire credit card. While reducing your overall balance is good, getting rid of “credit card capacity is bad.” If you pay off a portion of your debt, while keeping your credit cards, this strategy will help you boost your credit score.

Spread Out Applications for Credit

The banker is looking for any “red flags” that will identify you as a credit risk: late or missed payments, maxed-out credit cards or too many loan applications. If you apply for a flat, get a car loan and apply for some credit cards at the same time – all of these requests will be reported to the credit reference agency. Too many requests make you look desperate financially and can lead to a lower credit rating.


Other Creditworthy Attributes
Before you apply for a new loan, among other things, you should create a responsible life demonstrating durability and longevity. Banks will look at where you have lived, what jobs you have worked and how long you have had a bank account. Longevity can lead to a better loan because you are a lower credit risk.

Banks prefer anything that is fixed, durable, stable and long-term: fixed land line phones, long time at one job, owning a home and a long record with the same bank. Longevity is one of the primary criteria for your credit rating. Demonstrate that you are stable, reliable and dependable before you apply for new credit.

About the author  ⁄ Mike

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