Your credit score is extremely important! Your credit score can either help you save money, or cost you over a lifetime. When you apply for credit, your credit score can help lenders determine your ability to repay the loan based on your past financial performance. With a higher score, you may qualify for better interest rates, higher credit limits and more types of credit than you would with a lower score. Your score reflects the way you use credit, and there are no tricks or quick fixes to getting a good score. However, you can raise your score over time by demonstrating that you consistently manage your credit responsibly.
Here are 6 things you can do to improve your credit score.
1. Pay your bills on time – this accounts for 35% of your score. If you have a history of paying your bills on time, you’ll have an easier time getting a mortgage loan, car loan, or credit cards. Even if you’ve had serious delinquencies in the past, a recent history of on-time payments carries weight in credit decisions.
2. Keep credit card balances low. This accounts for 30% of your score. Keep balances less than half of your available credit line. Paying off credit cards can help your credit utilization rate, an important part of your score. After paying down your balances, do not close cards with paid-off balances. A longer credit history can help improve your score.
3. Check your credit report for accuracy. Inaccurate information on your credit report should be cleaned up with the original creditor and the credit bureaus. Get your free credit report at www.annualcreditreport.com.
4. Use credit cards—but manage them responsibly. Someone who has no credit cards tends to have a lower score than someone who has already proven that he can manage credit cards responsibly.
5. Don’t open multiple accounts too quickly, especially if you have a short credit history. This can look risky because you are taking on a lot of possible debt. New accounts will also lower the average age of your existing accounts which is something that your credit score also considers. Don’t open new credit card accounts you don’t need. This approach could backfire and actually lower your score depending on how you’re using the credit.
6. Contact your creditors or see a legitimate credit counselor if you’re having financial difficulties. This won’t improve your score immediately, but the sooner you begin managing your credit well and making timely payments, the sooner your score will get better.
These ideas won’t create a dramatic improvement in your credit score overnight. Be patient and diligent. Over time you will develop a stronger profile. Once you’ve done it, you’ll find it easier to apply for credit and favorable interest rates.
Free Annual Credit Report – www.annualcreditreport.com
Credit Report & Credit Score FAQs – www.federalreserve.gov/creditreports