How to Get a Good Score to Apply for a Loan?

Paying bills on time and pay off debt is fundamental, discover other tips.

To apply for a loan, regardless of the category, many consumers need to assess a high number of factors: the amount they want, the best modality for what they intend to buy or pay for and the prerequisites they need to fulfill. To get mortgage credit, personal loan or any type of financing, one of the main requirements is to have a good credit score.

This punctuation is used in several countries around the world, including Mexico, as an indication that the consumer can apply for a loan. However, many applicants may present a score lower than desired.

Improving your credit score is not fast, but it is possible if you know what the punctuation indicates and which steps you must follow to get a better evaluation. By reading the article below you will learn the way to get a good score.

What is the credit score?

Basically, it is a number that indicates the probability of the consumer or purchaser to pay for a purchase of a product or service on time. The credit score is used by many sectors, such as obtaining credit cards, opening accounts at banks, and applying for loans and financing.

The number begins at 400 and ends at 850. It means that a person with a 400 score has bad punctuation, and someone with a score near 850 has a great credit score. It is really hard to get an 850 score, since it is the highest level available, but it is possible to achieve high punctuation following a few steps.

How to achieve good punctuation

Considering that the credit score is a way of evaluating the chance of you paying for a purchase on time, the best way to increase your credit score is showing to financial institutions that you are a trustworthy person. Here are some ways to do this:

Keep your personal information updated

Personal information must be updated in any type of registry, which includes banks, government agencies and any other type of financial institution. This is necessary whether the institution needs to contact you about any update, problem or suggestion, including giving information about payments.

Therefore, to get a good credit score, personal data must be always up to date. Check the information that does not change, such as name and date of birth, and update changeable data, such as e-mail, telephone number, and home address whenever necessary.

Pay bills on time

This topic is important not only to get a good credit score but also to achieve healthy financial planning. Every bill, from the cheapest to the most expensive ones, must be paid on time if you want to avoid problems with debt and cuts in products or services, which can happen if you forget to pay an electricity or water bill, for example.

When you pay your bills on time, even the banalest ones, the financial institution understands that you are a good payer. To apply for a loan or get mortgage credit, this is fundamental: the agency or institution will consider that there are high chances of you pay back the whole amount of money they gave you.

Pay debt as soon as possible

If you have let some debt build up over months or years, you probably have a low credit score. It happens because you have “showed” the financial institution that you take a long time to pay the bills, even extrapolating the deadline.

The good news is that you can reverse the situation. Once you pay off your debt, and avoid getting new ones, the companies can reassess your capacity to pay a loan on time.

Avoid installments and purchases up to the credit card limit

Do you split all your purchases up to the maximum number of installments and let your credit card run out every month? This can be bad for your credit score.

If possible, try to balance purchases in cash and in installments and avoid reaching the credit card limit. This shows financial balance and indicates that you are more likely to be able to pay for all the purchases you make.