Tips to Improving Your Credit Score
by Tyler on 11/16/09
Whether you are looking to improve an already good credit score or you have a short sale or foreclosure on your record, it’s never too late to improve your credit score. The interest rates are at a record low, but you need to have great credit to even qualify.
Here are some tips to improve your Credit:
- Review your Credit report for accuracy. You are entitled to one free credit report per year from each of the 3 credit bureaus, Experian, Equifax, and TransUnion. Once you receive your report, check that the information is correct and that there is nothing that you don’t recognize on it.
- Repair Credit Report mistakes. If you discover any mistakes on your report, you need to dispute them immediately. You can find dispute procedures on the websites of the Credit bureaus. It is also required by law for the bureaus to investigate any disputed items. They are typically done within 30 days of the dispute.
- Pay your Bills on time. This is one of the easiest ways to improve your score. Payment history accounts for roughly 35% of your credit score. Paying the bills on time is the most important thing to do. If you are struggling to meet your payment due dates, contact your creditors to discuss further options.
- Increase the length of your credit history. Don’t go and cancel an old card that you don’t use that often or get new ones in a short amount of time like those ones offered when you go buy clothes for an extra 20% off. This accounts for about 15% of your score.
- Keep the balances low. It’s a good rule of thumb to keep your balances below 25% of your available credit. Even if you pay your balance off every month, a high average balance will impact your score. This accounts for about 30% of your score.
- Keep new credit requests to a minimum. This accounts for about 10% of your score. Every time a lender runs your credit, an inquiry is recorded. If you’re trying to get a loan don’t apply for new credit cards.
- Paying off a collection amount will not remove it from your report. It stays on your report for 7 years.
- Pay off debt rather than moving it around. Sounds simple right? Yes in theory, but we all wouldn’t have debt if it was that easy to pay off. So with that said, try and pay down your revolving credit. Owing the same amount but having fewer open accounts may lower your score.
- Beware of credit-repair scams. Don’t pay someone to wipe away the negative items in your file. Those companies out there that claim they can help you consolidate your credit are making huge profits. Be pro-active and talk to the creditors yourself. Explain your situation and work out a payment plan. Some creditors even settle for a fraction of your debt if you can pay in a lump sum.
If you find yourself in over your head with credit card debt, it is very important to talk to someone about it. There are millions of Americans in debt at the moment and there are people out there more than willing to help. That person could be your neighbor or even a colleague.
