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How to Improve Your Credit Score
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Overview:
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Nothing can create a dramatic overnight jump in your credit score. Developing a solid credit
history takes time.
By following these steps you'll be on your way to improving your credit score and reaping
the benefits of a higher score - like lower interest rates and payments!
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There are no quick fixes for improving your credit score. But you can raise your score over time
by demonstrating that you consistently manage your finances responsibly. Any of the
following ten tips can help you to improve your credit score:
Pay your bills on time. This is the best way to improve your score, and it's never too late
to start. Even if you've had serious delinquencies in the past, those will count less over time
if you keep paying your bills on time.
Keep credit card balances low. High outstanding debt can pull down your score. Don't go
maxing out your credit cards all the time.
Check your credit report for accuracy. It's possible that there may be inaccurate
information on your credit report that can be easily cleared up (see How To Fix Credit Report
Inaccuracies). If this proves to be the case, then you should contact one of the three credit
reporting agencies -- TransUnion, Experian or Equifax.
Pay off debt rather than moving it around. Consolidating your credit card debt onto one
card or spreading it over multiple cards will not improve your score in the long run. The most
effective way to improve your score is by simply paying down the amount you owe.
Keep your credit cards - but manage them responsibly. In general, having credit cards
and installment loans that you pay on time will raise your score. Someone who has no credit
cards tends to have a lower score than someone who has managed credit cards responsibly.
Don't open multiple accounts too quickly, especially if you have a short credit
history. Opening too many accounts in too short of a time period 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, something that your FICO score also considers.
Don't open new credit card accounts you don't need. This approach could backfire and
actually lower your score.
Don't close an account to remove it from your record. It's a myth that closing an
account removes it from your credit report. This is untrue -- even closed accounts remain on
your report, possibly for an indefinite period of time and may still be factored into the score. In
fact, closing accounts can sometimes hurt your score unless you also pay down your debt
at the same time.
Shop for a loan within a short, focused period of time. FICO scores distinguish between
a search for a single loan and a search for many new credit lines, based in part on the length
of time over which recent requests for credit occur. If you shop for a number of loans over too
long a time period, it can count against you.
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.
Steps to Improve Your Overall Credit
If you have a history of poor credit or think that you might, it's important that you find out
and take the steps to improve it. It will take time, but with discipline, you may expect to see
improvement in as little as six months. You see, creditors are interested in a track record.
You'll have to prove that you consistently pay your creditors on time and that you can
effectively pay down your debt. Here's the simple plan to improve your credit:
Know what's on your credit report and resolve any discrepancies.
Even if you believe you have a good credit score, it is still wise to check with credit reporting
agencies to make sure they contain a similar view of your credit history. It is also wise to make
sure there are no errors on your report, such as name misspellings or incorrect addresses.
Plan to pay your bills on time and follow through.
You can start this today, even before you take a look at your credit report. Contact your creditors
to review your payment options and catch up with any late payments. Focus on ways to reduce
your spending.
Stop using credit cards now.
Paying down your credit card balances will not only improve your credit rating over time, but
you'll be in a better position to negotiate a lower interest rate for your cards.
Don't live beyond your means.
Make paying your bills and buying only essential items your main priority. Carefully weigh the
importance of all new purchases against the greater importance of reestablishing your good
credit.
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