How to Improve Your Credit Score
Your credit score is important. In many cases having a high FICO score is crucial to getting approved for a new car loan or a mortgage for the beautiful house you’ve been dreaming of. A high score also gives you access to better interest rates. This article will show you how to improve your credit score by following seven simple steps:
1. Check your credit report
The first step you should take is to check your credit report. When was the last time you requested a report? It’s easy to do. Many banks and credit card companies allow you to check your credit report for free. The three largest credit bureaus, Equifax, Experian and TransUnion also offer free credit reports. In fact, the three jointly operate AnnualCreditReport.com, a site where you can request reports from all three bureaus at the same time.
2. Create a plan
Once the actions that led to lowering your credit score are identified, it’s time to set up a plan and stick to it. Setting deadlines and new routines to clear old debts may appear daunting, but there are tools that will teach you how to implement these changes.
Credit.com is one such tool. In addition to reviewing your current score and errors, it also allows you to create a plan that will help improve the score rating.
3. Pay off old debt
After your payment plan is put in motion, paying off old debts should be a priority. Commit to paying a fixed monthly amount until your credit card balance is back at zero. You will have a clean slate to start rebuilding your credit.
4. Pay on time, every time
Late payments are one of the main reasons credit scores plummet. If you’re serious about raising your FICO score to a high range, make sure to pay your bills and credit cards on time, every time.
An easy way is to set up auto payments. If this option is not available with your credit card, create alerts on your phone calendar as reminders that a payment is due soon.
Age of credit history is very important when FICO scores are calculated. How old is your oldest credit card? If less than five years, it might a reason for a low score. Work towards building history and if you don’t have credit cards at the moment, apply for one that fits your needs.
If you have several accounts open, do not close them. Keep them active to grow to at least five years, it helps boost your credit score.
6. Don't take chances
When paying off an old debt or current credit cards, don't grow overly confident. Stick to the plan and don’t miss any payments. One missed payment could drop your score 30 to 50 points.
Also, if you agreed to pay $500 each month to cancel a debt, stick to it. Paying less than the agreed amount repeatedly could send a negative signal to the credit bureau.
7. Keep balances low
When trying to fix your credit score remember to keep low balances. If you have multiple credit cards, their combined balances should not exceed 7% of your available credit (also known as your debt utilization). Being able to maintain a low balance while consistently paying your credit card in a timely fashion will help your score go from poor to good.
We hope these tips help you reach your desired score. Be aware that fixing a credit score won’t happen overnight. This process takes time and commitment. But if you stick to your plan, good things will happen.
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