Your credit score is important when applying for loans or credit cards in the Philippines. Whether you want to finance a new vehicle with an auto loan, buy your dream home with a mortgage loan, or be approved for a new card, your credit score will be an essential factor that banks and lenders consider.
A higher credit score shows lenders that you are a responsible borrower, which qualifies you for lower interest rates and better terms.
In this blog, we will detail five effective ways to improve your credit score over time gradually. These strategies can help you improve your creditworthiness by making complete payments each billing cycle, maintaining low credit use percentages, and verifying your annual credit reports for inaccuracies.
Improved credit scores increase your chances of qualifying for the best interest rates and terms when you need financing, saving you money in the long run.
What is a Credit Score?
A credit score is a three-digit numerical rating that helps lenders predict how reliably you’ll repay borrowed money. It typically falls between 300 on the low end and 850 on the high end. Your credit score is calculated based on several factors in your credit history and current credit utilization:
Payment History
This component, which accounts for 35% of your score, determines whether you have paid past bills on time. Missed payments can dramatically reduce your score.
Amounts Owed (30%)
This calculates how much of your available credit you’re currently using across all of your accounts by comparing balances to total credit limits. Using a high percentage can lower your score.
Length of Credit History (15%)
A longer track record of appropriately managing credit accounts over time improves your score. Newer credit profiles tend to have lower starting scores.
Credit Mix (10%)
Your rating benefits from having a variety of credit kinds, such as credit cards, vehicle loans, and mortgages. Rather than only credit cards.
New Credit (10%)
Opening multiple new credit accounts in a short period will temporarily lower the score you have due to the increased number of hard queries.
The higher the score on your credit report, the more lenders will consider you a low-risk borrower who is likely to complete all loan payments on time. As a result, you are more likely to qualify for reduced interest rates on loans, credit cards, mortgages, and other forms of financing than someone with poor credit.
5 Ways to Boost Your Credit Score for Better Loan Deals
Practicing these five helpful behaviors can help you improve your score:
1. Pay all bills on time
This includes your credit card bills and utility payments from Meralco, Maynilad/Manila Water, PLDT/Globe, and other regular home costs. Payment history is the most important component of your credit rating, therefore setting up Automatic Debit Arrangements (ADA) can help you never miss a payment deadline.
2. Keep credit card balances low
Your credit utilization ratio, which compares outstanding balances to total credit limits, has a significant impact on your score. The Bangko Sentral ng Pilipinas suggests keeping usage below 30%. Pay off bills aggressively each month, even setting aside a percentage of your earnings for savings.
3. Increase credit limits
In addition to paying debt, seeking a credit limit increase from your credit card issuer might help reduce your spending percentages. Higher credit limits, when used carefully, can help enhance the quality of your score.
4. Don’t open too many new accounts at once.
While receiving the new SCC (Secured Credit Card) Mall Cashback Credit Card or signing up for the current credit card promotion may be appealing, too many credit inquiries from registering for many new accounts at the same time will harm your score on credit. Spread out applications for new cards carefully.
5. Correct any errors that are on your credit report.
The main credit bureaus that banks check in the Philippines are Lexis Nexis, CRIF, and TransUnion. Fixing any incorrect negative items on your credit report from these bureaus might help boost your rating with creditors. Get free annual reports and provide documentation to challenge any mistakes.
By carefully adhering to these five guidelines, you can improve your financial standing and raise your chances of being approved for loans with better terms and lower interest rates. This can result in large savings throughout a loan, leaving more money in your pocket. Do not underestimate the importance of a good credit score!
Get the Loan Deals You Deserve with an Improved Credit Score
Vidalia Lending Corp. understands the importance of having a strong credit score when it comes to getting authorized for loans with low interest rates and favorable terms. That is why we are here to take you through the necessary actions to enhance your creditworthiness.
Follow the effective ways given in our blog, and you’ll be on your road to a better credit score. When you’re ready to apply for a loan, our team will work with you to create a loan package that is specific to your improved credit profile.
We are dedicated to providing creditworthy Filipinos with affordable finance solutions. Improve your credit score with our recommendations, then come to us and we’ll make sure you get the loan you need. Apply here.
