3 Ways to Get Approved for Credit, No Matter Your Score
3 Ways to Get Approved for Credit, No Matter Your Score
A good credit score isn’t necessary to get credit, but it helps. Your score is the number assigned to you by the three major credit bureaus—Equifax, Experian, and TransUnion—which indicates your creditworthiness based on your history of borrowing money and paying bills on time. Lenders use your score as an indicator of how risky it would be to give you money in the form of loans or lines of credit.
1) Know your FICO score
If you’re applying for credit cards or trying to buy a car or house, your credit score will make or break your application. You can find out what it is by going online and signing up with a service like CreditKarma; another one is called Credit Sesame. These services give you access to your FICO score as well as tips on how to improve it (and if you sign up for a free account, they’ll email you updates on how your score changes over time). Another tactic?
2) Understand Debt-to-Income Ratio
There are three main factors that determine whether you’ll be approved for a loan or credit card: income, credit score and debt-to-income ratio. A common method of measuring your debt is by assessing how much money you owe relative to how much money you make. In short, lower your DTI and improve your credit rating! If it seems like everything costs more than it used to—housing and utilities are going up and grocery prices are higher—it’s because they are.
3) Keep your account open
One of the most common reasons why people have trouble getting approved for credit is because they don’t have any account history. That means you may have no credit score at all. The simplest way to build your credit is by keeping at least one account open and active. If you don’t know where to start (student loans are usually an easy first step), work with a loan officer or a financial planner who can help you get started on your journey toward improved credit. You should also look into a secured credit card if you’re having trouble finding something that fits your needs. These cards require a deposit in order to be opened—usually around $200—and then you use it just like any other credit card. In addition, secured cards typically report positive information back to credit bureaus about your payment history as well as create another layer of data for them to pull from when building your credit rating.
Credit Score Conclusion
Each of these factors is weighted in a unique way by each credit bureau. Although your score will likely be similar at all three credit bureaus, there can be some variation in your score from one bureau to another. For example, if you’ve never paid off a loan and are carrying a balance on one card with a high interest rate, it will affect your credit score differently than if you were carrying that same balance on a low-interest card.
