How To Improve Your Credit Score

Regardless of whether you’re rich, poor, etc, most lenders and financial institutions will check your credit score before offering you a loan. In order to get approval for a  personal loan, mortgage, or even a payday loan, the lender will examine your  credit history and credit score. A better score also gets you better loan interest rates for such things as auto loans and mortgage loans. That is why it is recommended that you take steps to improve your credit score. Improving your credit score doesn’t happen overnight. It does take some time to accomplish this.

There are at least 6 things you can focus on to improve your credit score:

1. Payment History – You should try to pay your bills on time. You should not opt for late payment options which can bring your credit score down. You can also immediately contact your creditors whenever you get in a bind and can’t make your payments on time. Creditors tend to be pretty lenient and will work with you to set up some sort of payment plan and won’t always report your late payment to the credit bureaus. But you have to do this early on. You shouldn’t wait until you’re already delinquent in your payments. This will help you keep your credit reports clean and your credit score high. If you ever do get into a financial situation where you cannot make your payments – even after you’ve set up a payment arrangement with your creditors – you may need to discuss your situation with a nonprofit and legitimate credit counseling service. These services will then negotiate a payment plan with your creditors.

2. Debt-to-Credit Limit Ratio – You should try to keep your debt-to-credit-limit ratio  low. The magic number seems to be around 30% and less. Try not to go higher than 30%. Most experts also recommend that in order to improve your credit score, you should not close your unused accounts even if the balance is zero. Low balance as well as showing that you have some credit history will work towards your advantage when your credit score is calculated.

3. Management of New Credit – Don’t go crazy trying to get new credit. Don’t respnd to every credit card offer you get in the mail. Sounds obvious, but if you don’t need it, then don’t apply for it. This will raise a red flag with potential creditors. If you are interested in obtaining several credit cards, then do it over a good span of time.

4. Credit History – We touched on this earlier. If your credit history is less than 3 years, you should be careful about opening new credit accounts in a short span of time.

5. A Varied Credit Profile – If improving your credit score is your goal, then a varied credit profile often helps. If possible, a variety of debt instruments such as installment loans, credit cards, and fixed payment loans instead of just credit card debt looks better.

6. Fix or Dispute Credit Errors – By correcting any errors on your credit files, this will also help improve your score. To get the details of your credit files from all 3 bureaus, you can obtain your free credit report once an year from the government. For more frequent access, you might try a credit monitoring service and get a free trial, or order your reports directly via the 3 credit bureaus.

These are just a few things briefly mentioned to help improve your score.