Improving Your Credit Score
Here are 5 tips to help improve your credit score.
Get copies of your credit report
Under federal law, you can get a free report from each of the three national credit reporting companies every 12 months. Be sure to get your yearly copies to check that all the information is correct. Incorrect information leads to lower scores.
Pay your bills on time
One of the most important things you can do to improve your credit score is pay your bills on time. You frequently can set up automatic payments directly with each company. Most banks also have an automatic bill pay system. Just be sure you have enough money in your account to avoid overdraft fees. A long history of on time payments will raise your score. A single late payment can drop your score as much as 90 points!
Understand how your credit score is determined
Your credit score is usually based on the answers to the following questions:
What is your account history?
The answer to this question is very important. If you have paid bills late, have had an account referred to a collection agency, or have ever declared bankruptcy, this history will show up in your credit report.
What is your outstanding debt?
Many scoring models compare the amount of debt you have and your credit limits. If the amount you owe is close to your credit limit, it will have a negative effect on your score. If you have large amounts of outstanding debt, paying it off will raise your score.
How long is your credit history?
A short credit history may have a negative effect on your score. Short histories can be offset by other factors, such as timely payments and low balances.
Have you applied for new credit recently?
If you have applied for too many new accounts recently that may negatively affect your score. However, if you request a copy of your own credit report, or creditors are monitoring your account or looking at credit reports to make prescreened credit offers, these inquiries about your credit history are not counted as applications for credit. Do not apply for new credit more often than necessary.
How many and what types of credit accounts do you have?
Many credit-scoring models consider the number and type of credit accounts you have. A mix of installment loans and credit cards may improve your score. However, too many finance company accounts or credit cards might hurt your score.
Beware of credit-repair scams.
Sometimes doing it yourself is the best way to repair your credit. There is no need to pay anyone but if you do, be sure the company is trustworthy and has a good reputation.
