Improve My Credit Score
How Can I Improve My Credit Score
In today's economy it's more crucial than ever to have a good credit score, but millions of consumers simply don't and all too often find themselves asking how can I improve my credit score?
How can I improve my credit score if I already have a credit record? If you already have credit accounts (credit card(s) and/or loans), you will have a credit file and score with the credit bureaus. The following tips will help you answer that question, how can I improve my credit score.
STEP 1 - Use credit, but be smart about it. Make manageable purchases with your credit card and pay down the balance each month, but don't pay off your balance completely. A $0 balance is good to avoid interest charges but, interestingly enough, not to build your credit score. If a $0 balance is reported to the bureaus - you never know when your credit card company will report to the bureaus - it appears as though you're not using the account regularly, which negatively impacts your score. To improve your credit score, pay off all but $5-$10 of your balance. This demonstrates responsible and controlled use of credit. And never max out your card, even if you are able to pay off the full amount at the end of the billing cycle. Keep your balance below 30% of the available limit. You might be thinking, "But I really want to improve my credit score". Okay, get it down to 10% and you will reap the greatest rewards to your score. Be meticulous in this area as more than a third of your credit score is based on your credit utilization ratio (how much of your available credit you're using).
STEP 2 - Spread out your debt. Pertaining to credit scoring, it's better to have small balances on several cards than a big balance on one card. It's also good to have wide gaps between your balances and your limits, especially on revolving debt (credit cards). You might be thinking, "doesn't paying down any of my debt improve my credit score?" Although you'll still be rewarded for paying down installment debt (mortgages or auto loans) your scores improve much more dramatically when you pay down revolving debt. So this is a must use tip when your thinking, how can I improve my credit score.
STEP 3 - Keep accounts open and active. While working on raising your scores, do not close any accounts. You might be thinking here, "how does this help improve my credit score?" Each of your accounts have a history, and your credit history represents 35% of your score. And don't let your creditor close it due to inactivity (a 'closed by grantor' listing lowers your credit score).
STEP 4 - Have a healthy mix of credit. Go ahead, ask, "how does this improve my credit score?" Well, let us explain. Have at least one installment and two revolving accounts; after that be careful about applying for new credit. Too much available credit can be perceived as dangerous by potential lenders. You'll also get dinged with inquiries; every point counts when you are applying for a major loan.
STEP 5 - Monitor your credit reports. Do this one whether you are trying to improve your credit score or not. It's just a good idea to do. Never assume that all of your positive efforts are being reported, or that everything on your report is accurate. If there are mistakes, you need to notify the bureaus to correct them. If you are going to be judged so strictly by what's on your credit report, then it should be accurate.