How to Improve Your Credit Score

It may take some bit of work until you get the idea of how to improve your credit score. A credit score may be one of the most important aspects of your financial situation that would need your constant monitoring, especially if you always have the need to borrow money from lenders. Having a low credit score will ensure you of having trouble getting your credit application approved as you would have wanted.

Your credit score tells lenders of how dependable you are as a borrower. From your credit score, lenders and credit institutions may be able to gauge your standing as a borrower. That is because the credit score is a mathematical measure of a person’s borrowing habits and behavior based on some important credit factors. A formula developed by the Fair Isaac Corporation (FICO) is usually used to calculate for one’s credit score. That is why your credit score is also usually referred to as the FICO score.

When you have a low credit score, it tells the lender straight away that you are not a very prospect as a borrower. This may be based on your previous credit accounts from which you may have defaulted on, late payments of debts, bankruptcy or foreclosure issues that you may have in the past and other similar factors. The higher your credit score, the more attractive you are as a borrower in the eyes of the lenders. This might mean that your credit application from them might just be easier to approve.

There are many ways that you may be able to improve on your credit score. This will include having a closer look at your current credit standing. If you do have outstanding credit to take care of, it would be good to pay your bills on time. Delinquent payments of your outstanding credit have a major negative impact on your credit score. It is also important to note that the longer that you try to pay your bills on time, the better it will be for your credit score.

If you do find yourself missing on some payments, it may be wise to get current as quickly as possible on your payments if you so can. Staying current with your outstanding credit accounts may also have an effect on your credit score. What’s more, your credit record, along with the missed or delinquent payments, may reflect on your credit report and will stay there for a period of seven years. It will be looked upon as a smudge on your report even after you have paid off your debt.

If you find yourself having a hard time managing your outstanding credit, it may be time that you contact your creditors or ask for the help of a qualified credit counselor. These actions may not immediately improve your own credit score. But the sooner you act in managing your debts well and paying your bills on time. It will eventually make your credit score better over time.

Once you learn how to improve your credit score, the better your chances will be on availing of a much needed loan or mortgage when you really need it. It would be frustrating for one to apply for some much needed credit and not get approved in the end, all because of a low credit score.

Improving your credit score can also assure you that you have better credit options especially during times that you might need it most.

7 ways to improve your credit score

 

Your credit score is one of the most important numbers you’ll carry through life — like it or not.

No one asks if you want one. No one tells you when you get one. No one tells you what it is unless you pay to find out.

Yet this measure of your money management determines whether your application for a credit card, auto loan or mortgage is approved or rejected. Insurers use it to set premiums, and employers look at it when you apply for a job.

 

1. Correct any errors on your credit reports.

Order free copies of your credit reports from Annualcreditreport.com and read them thoroughly to find errors. Removing inaccurate information can give your credit score a bump in about 30 days and costs nothing but postage. Just write down all your disputes in the area specified by the bureaus. (this page is enclosed with your credit report)  You can also disputes items online .

Please Note: you will have to do this process for all 3 bureaus. Just because it was removed from one credit bureau company doesn’t mean it will be automatically removed from another.

 2. Pay all of your bills on time.

We know you have a lot going on in your life. Bills get misplaced and writing checks is a pain. But you need a system to get every bill to every creditor, before the due date on your statement.

More than a third of your score is based on your payment history, and the formula is heavily weighted toward your most recent record. Paying all of your bills on time for just six months can boost your score.

All late payments are equally damaging to your credit score, so do everything on time: Pay utility bills, pay parking tickets and even return library books before their due date.

 3. Use every credit card you have.

Credit cards that never see the light of a cash register don’t contribute to your payment history. Rotating charges among all your cards, and making all of the payments on time, can build a good payment history more quickly.

 4. Pay down credit card balances.

The next biggest factor in determining your credit score is how much of your available credit you’ve tapped. If you owe $6,000 on a card with a $10,000 credit limit, that means you’ve used half of your available credit — and that’s too much. Try to keep your debt-to-available-credit ratio below 40% on every card.

 5. Don’t apply for credit on a whim.

Your mailbox may be full of credit card applications offering low, low rates for a few months. And cashiers often push you to get a store charge card when you check out, tempting you with a discount on your purchase if you’ll just fill out their form. But if banks and stores are constantly asking the credit agencies for your credit history, your score suffers. As a general rule of thumb, figure that every inquiry costs you 10 points.

 6. Ask to have a repaid debt taken off your credit history.

If you’ve mended your past-due ways and brought a delinquent account up-to-date, ask the creditor to remove unflattering entries from your credit reports. You’ll have the most leverage if it’s an active account that you’ve paid on time for at least a year.

Just write a letter and ask. It’s certainly better than allowing a bad debt to sit on your credit report until the agency removes it after seven years.

 7. Become a cosigner on an established credit card.

The account will appear on your credit history with the original opening date (not the date when you were added to the account) along with its entire history of on-time payments. That can add 30 to 45 points to a poor credit score.

You’ll need a spouse, parent or astoundingly good friend who’s willing to add you to their account as a cosigner with legal responsibility for the debt. Being an authorized user, someone who can make purchases with the card but isn’t responsible for making the payments, will no longer help with your credit score.