Credit scores and credit ratings are two financially related categories which can determine whether or not financial institutions will lend money to borrowers. Before an individual can acquire funds from a bank, credit union or other type of lending institution, the lender will check the credit ratings and credit scores of the applicant in their determination of whether or not to lend money to that particular person. If one wishes to find out how they can go from a bad credit card rating to an excellent credit card rating, there are five steps the prospective borrower should take in order to make their chances of obtaining funds much more likely.
1. Decrease Credit Card Debt to 10% or Below
One of the best ways to improve a credit card rating and take that current bad credit card rating and boost it to an excellent credit card rating is to try to get all of your credit card debt to 10% of the credit card limit or lower. Doing so will show other lenders that you have a good enough credit card rating to be given a higher credit card limit yet you choose to keep your balance low by paying off current debt on a continual basis. For those who may have high balances, if one desires to boost their bad credit card rating to an excellent one, decreasing the current debt of each credit card to below 10% of the credit limit is a step in the right direction.
2. Keep Overall Spending on Credit Cards to a Minimum
Although creditors want to see some form of spending action take place on credit cards, they do not want the spending to be excessive. Keeping overall spending on credit cards to a minimum not only will keep the credit card debt on each individual card to a reasonable amount but it will make it more likely that the individual can pay off their credit cards in a timely manner.
3. Don't Recklessly and Unnecessarily Apply for Credit Cards
Many people do not know that every time you apply for a new credit card, an inquiry is made on your credit report. The more inquiries which are made, the less likely it is that lenders will provide you with credit which could in turn make it more difficult to go from a bad credit card rating to an excellent credit card rating. Therefore, only apply for the credit cards which you truly need and will use. The fewer applications you fill out for credit cards, the better it is on your overall credit rating.
4.Increase Your Credit Limits Whenever Possible
It may sound unusual, however increasing your credit limits on your credit cards will help to make your bad credit card rating head towards an excellent credit card rating. Doing so not only shows other creditors that you are a valued customer with your current lenders but also allows the 10% or less balance on the credit card bill to be more probable.
5. Do Not Close Unused Cards
Another tip to help boost one's credit card rating from a bad to an excellent status is to keep unused credit cards open. Although this may be tempting for some, try to resist the urge to spend any money using that particular credit card yet keep it open. By doing this, the cardholder is establishing a credit and helping to increase their credit card rating in a favorable way.
BCG Blog Editor
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