How to Improve Your Credit Score

Posted in Personal Finance by Kevin | Tags: , ,

Everyone knows what the purpose of a credit score is, so there is no need in diving into a lecture on its purpose. In a nutshell, a credit score is used to quantify your financial reputation. How good are you at paying back money you owe? A credit score is often used to determine whether a person can acquire a type of loan such as a car loan or a credit card. For many people, improving their credit score is all that they have to do to secure a loan. Improving your credit score may seem like a difficult task, but there are many simple things that you can do to improve your rating. These tips from Amy Nutt could go a long way in helping you rebuild your credit and your confidence.

Check your own Credit History: Many people often forget about outstanding debt showing on their credit history, or there may be something they paid off that is still showing as an outstanding bill on their report. Reviewing your own report will allow you to bring your report up-to-date as well as clean up any outstanding bills resulting in an improved score.

Minimize Credit Score Checks: Every time you apply for a credit card, loan, retail store card, the company checks your credit score. The more hits that your report receives, the lower your credit rating score will be. To avoid credit rating damage, do not make applications that result in a credit rating check.

Pay your Bills on Time: Your history of bill payments can affect your credit history. Not paying your bills by the due date can lower your credit score. Bringing your bills up-to- date and then making sure all bills are paid on time each month will improve your credit score.

Keep your Debts at a Minimum: People who have low debt will have an improved credit score. For instance, if the maximum limit on your credit card is $5000, and you have accrued $4800, your credit score will be lower. The lower your debt amount, the better your credit score. Lenders check to see if you manage loans properly. If it does not appear you can manage your debts, your score will be lower. A customer’s payment history is an important factor when determining a credit score. If you have several cards with high debts and decide to consolidate them on one card which results in a debt that is close to your maximum limit, this will actually lower your credit score. If you transfer a high amount to several accounts, it will show that you are keeping bills at minimum. Most experts say that you should not have a debt over 30% on credit cards and other lines of credit.

Establish a Good Credit History Early: The longer you have a good credit history and maintain it, the better your credit score will be. If you open and close accounts often, it will negatively affect your rating score. Companies tend to go back a year to check your credit history. Maintaining several credit cards for a long period without any payment problems will also help improve your score.

Maintain Unused Accounts: If you have accounts that are rarely used, you should not close them. Maintaining accounts that show that they are always paid, and the amount in each is very low, will help improve your credit score. Keep Mortgage Rates Low: People with mortgages that have a high interest rate or a variable rate instead of a fixed rate, may be considered a higher risk because of the volatility of the market. Refinancing your mortgage for a low fixed rate will show that you are safe if the economy takes a down turn and interest rates suddenly increase.

Finally, here are some other tips I think would be beneficial in raising your credit score:

If you have bad credit, take out a secured credit card. Sure, you have to put into your account as much money as you are willing to spend, but some secured credit cards report to four credit bureaus and could go a long way in increasing your score.

Settle all your outstanding debt, collection account, etc. Settling these charges will give you a very good increase in a very short time span. You won’t get delinquent payments, you won’t show a fine on your account, etc.

A poor credit score can greatly reduce your chances of getting a mortgage, car loan, and many other types of loans. Implementing a number of measures that will improve your credit history will help you obtain your future financial goals.

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