If you want to know how to get better credit, the first thing you must understand is what having good credit means. Learning how to get better credit begins with having an understanding of responsible borrowing habits. Your credit report and the things that a bank will look for when deciding if they want to grant credit to you follows a very simple logic. It really comes down to how much risk your present to them as a potential borrower. Here are some of the things that lenders will look at and they are also things to pay attention to if you are trying to figure out how to get better credit.
Stability is something that affects your credit report, credit score and is something that your bank will consider when determining if you qualify for credit. If you move residences or change jobs, often this is a sign of instability. Most lenders like to see that you have maintained the same employment or residence for three years. Your credit report will list your three most recent addresses and employers. If they are all different and have changed in a short period of time, this will affect your credit score.
How you use and pursue credit is another measure that your bank will use to determine risk and could be an indicator that you need to get better credit. The number of times that you apply for credit in a given calendar year will indicate if you are a "credit seeker". Too many inquiries will reduce your credit score and borrowing power. The rule of thumb is to make no more than 4 applications for credit in a given calendar year.
Having too many credit cards (even if you don't use them) will make you appear as a credit risk. The reason being is because of the "ability" that you have to go into debt. Having credit cards that are close to the limits, at their limits or over their limits is also a problem. It will not increase your borrowing power, will reduce your credit score and will trigger a message to appear on your credit report that states "balances are to close in proportion to credit limits". In this regard, if you want to know how to get good credit; a good rule of thumb is to only spend on credit cards what you can afford to pay in full each month.
Obviously, how you pay your credit cards is important. Late payments will destroy your credit and is definitely not a good way to get good credit.
If you are trying to get good credit and increase your borrowing power, your bank will also look at your cash flow, income to debt ratios, type of income, assets and more. Much of the criteria that your bank will look for are not contained within your credit report. Rather, it is information requested in a credit application and assessed separately from your credit report. Even if you have the best credit, if other this other criteria is not met you will not be able to get credit from many banks.
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