Like any other business, anyone would always want the best refinancing rates ranging from a mortgage to a car loan. A positive and higher credit score can get you a better refinance rate or term. Building a high credit score assures lenders that you know how to manage your debt!
Here are seven top ways to build a higher credit score.
1.Higher Credit Card Limits
Ask for a higher available credit limit on your credit cards. Ensure that your spending is no more than 25% of the available credit limit. This highlights to lenders that you are a sensible borrower.
2.Your Credit Report
Your credit report is your financial performance scorecard. But what most people don’t know is that financial institutions share information at the backend with each other. You can get a copy of your credit report annually, free from here.
Check your credit report to ensure there are no errors. Yes, errors are possible, and they lead to a lower credit rating. Make time and effort to correct any credit errors for the future.For any errors, ensure that you file a dispute with all three major credit bureaus.
If you have any existing loan, an improved positive score could get you better refinance rates and terms. Remember, every cent counts when you’re repaying a loan.But don’t quit using credit.
Some folks don’t like to have to pay off debts. They do not use credit cards or minimize their spending on their cards. Having debt and paying them on time shows your ability to manage debt.
If you have multiple credit cards, do not limit your card purchases to only one particular card. This shows that you are not a good user of credit available on other cards. An alternative is to reduce the number of available cards to those you find convenient to use.
3.Minimize New Credit
When you apply for new credit, the lender runs your credit report, called a hard inquiry. This affects your credit report negatively. Wait for your refinancing process to be completed before applying for a new credit card or buying a new car.
4.Shorter Loan Terms
With shorter loan terms, you get a lower interest rate. Most of your payments go towards paying off the principal amount. The interest amount reduces over the loan period, ensuring you have paid a lower interest during the entire loan.
Compare refinance rates with at least two to three lenders to get the lowest rates. A proposal from one may help you secure a better rate with another. Be sure that you have completed rate comparisons within thirty calendar days (rate shopping window) as multiple lenders download your credit report, which then gets counted as one single inquiry.
6.Secure a Refinance Rate
Constantly be aware of refinance rates that may fluctuate with market conditions – these are affected by government reports & policies, changes in economic news, and the overall socio-political climate. When you have visibility, move fast to secure a low refinance rate before it increases.
In conclusion, securing a better refinance rate requires planning – something you can easily do!