Simplest Ways to Increase Your Credit Score

Thu, May 3, 2012

Financial Advice

Your credit score is a number from 300 to 850 that summarizes your credit history. A score closer to 300 signifies to potential lenders that you don’t have a pristine track record, while a score closer to 850 means you typically use loans wisely and pay them back promptly.

Because your credit score takes into account all recent credit history, improving it typically takes time. Usually, the only way to improve your credit score drastically is to use credit responsibly for a series of months or years. But there are some actions you can take now which can boost your score almost immediately.

Here are some simple guidelines to help you improve your score:

  • Request a copy of your credit report and review it for accuracy. If you find any errors or outdated information, notify the credit reporting agency. If the negative information cannot be substantiated, the credit bureau will remove it. You’ll see an improvement in your score as soon as the wrong information is removed.
  • If you can’t afford your monthly bills, contact your creditors as soon as possible. Your creditors can work with you to set up payment plans. This can reduce the harmful effects of high balances and help you make on-time payments.
  • If you miss payments because you’re forgetful, set up reminders. Write down deadlines in a daily planner or on a calendar and set up email reminders. You may see an improved score after just a few months of on-time bill payments.
  • Pay down your debts. Rather than paying off one debt or loan with another one, work towards reducing your total amount of debt. Debt settlement may be an option for you if you can not afford your payments.
  • Keep your credit-card balances low from month to month. Racking up a high balance every month, even if you pay every bill in full, can harm your credit score.
  • Keep old credit cards active. Even if an older card is no longer your primary credit card, its age shows a longer credit history and helps your score.
  • Apply for new credit only when you need it. Opening several accounts within a short period of time can signify financial trouble and hurt your score.

Following these tips can help you improve your score in a relatively short period of time. These can be especially helpful if you’re anticipating a big loan like a home mortgage.

In a case like that, just a small boost often can qualify you for lower interest rates and fees, potentially saving you thousands of dollars over the course of the loan.

Still, the only way to increase your score long-term and keep it high is to use credit responsibly. Strive to make regular and timely payments towards your debts, reducing credit card balances as well as your total debt amount.

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