Top 9 Ways to Improve Your Credit Score
Jan. 16th, 2007 12:34 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
bonniegrrlSince I'm researching this, you might as well learn something too. ;-)
Surprisingly they say not to close out old credit card accounts, and to spread your spending on more than one credit card to keep your monthly balances low. All this time I thought having one card that I paid off in full every month was more responsible. Guess not.
Read Top 9 Ways to Improve Your Credit Score for full explanations!
1) Pay Your Bills on Time
Whether or not you pay your bills on time significantly affects your credit report - 30% of your credit score is based on your payment history. Late payments are the most common items of negative information on peoples’ credit reports. The easiest and most straightforward thing you can do to protect your credit score (improve it) is simply to pay your bills on time.
2) Keep Your Credit Card Balances Low
It's a Catch-22 situation: in order to have a credit score, you must have credit. However, the higher your loan or credit card balances are (in relation to your total available credit), the lower your score will be, even if you never make a late payment. Depending on your personal situation, it may make sense to spread your credit card debt over three, four, or five cards, while keeping your balance on each of them below that 35 percent of the total credit limit mark, assuming the interest rates are equal.
3) Don’t Close Unused Accounts
The length of time you’ve had the credit established with each creditor is one factor in calculating your credit score. The longer your positive credit history is with each creditor, the better, so it's best to avoid closing old credit account, even if you don't use them. Too many open credit cards at one time can hurt your score, but having several old accounts that you don't use can help improve your debt-to-income ratio.
4) Only Apply for Credit When It’s Needed
Many retailers offer their own credit cards, and will offer a discount on your purchases if you apply (and are approved) at the point of sale. Before applying for that store’s credit card, read the fine print since the interest rates are often much higher than those offered by major credit card issuers. Apply only for new credit if you need it, as too many credit inquiries can lower your credit score.
5) Separate Your Accounts after a Divorce
It’s common for a couple to obtain joint credit card accounts and co-sign for various types of loans. If a couple gets divorced or separates, both parties remain responsible for any outstanding amounts on the loans. It's important to remember to separate your accounts, either by closing the joint accounts or having one person's name removed. It will probably become necessary for one or both parties to re-establish their independent credit.
6) Correct Inaccuracies in Your Credit Report
One of the fastest and easiest ways to quickly give your credit score a boost is to ensure that everything in your credit report is correct. If your credit report contains inaccurate information, you can dispute the inaccurate items through the credit bureaus; if the information isn't verifiable within 30 days, it must be removed from your credit report.
7) Avoid Bankruptcy If At All Possible
There are a lot of myths about bankruptcy, however, when it comes to your credit score, filing for bankruptcy is one of the absolute worst things you can do. If your credit score hasn’t already dropped as a result of late payments, missed payments, charge offs and/or collections, when the bankruptcy is listed on your credit report, you will notice an immediate drop in your credit score, sometimes as 200 points, or more. In addition, bankruptcy remains on your credit report for up to 10 years, which can continue to negatively affect your credit score.
8) Avoid Transferring Balances Onto One Credit Card
Transferring your high interest credit card balance(s) onto a single card with a low rate can make a lot of sense and save you thousands of dollars in interest charges, however, it can also lower your credit score temporarily.
9) Negotiate with Your Creditors
Instead of skipping a handful of payments or defaulting on a loan, contact the creditor as soon as a problem arises and try to negotiate a lower payment or interest rate. If they turn you down, seek help from a credit counseling or debt management program before you start missing payments or making late payments which can follow you on your credit report, and lower your score, for up to seven years.
Surprisingly they say not to close out old credit card accounts, and to spread your spending on more than one credit card to keep your monthly balances low. All this time I thought having one card that I paid off in full every month was more responsible. Guess not.
Read Top 9 Ways to Improve Your Credit Score for full explanations!
1) Pay Your Bills on Time
Whether or not you pay your bills on time significantly affects your credit report - 30% of your credit score is based on your payment history. Late payments are the most common items of negative information on peoples’ credit reports. The easiest and most straightforward thing you can do to protect your credit score (improve it) is simply to pay your bills on time.
2) Keep Your Credit Card Balances Low
It's a Catch-22 situation: in order to have a credit score, you must have credit. However, the higher your loan or credit card balances are (in relation to your total available credit), the lower your score will be, even if you never make a late payment. Depending on your personal situation, it may make sense to spread your credit card debt over three, four, or five cards, while keeping your balance on each of them below that 35 percent of the total credit limit mark, assuming the interest rates are equal.
3) Don’t Close Unused Accounts
The length of time you’ve had the credit established with each creditor is one factor in calculating your credit score. The longer your positive credit history is with each creditor, the better, so it's best to avoid closing old credit account, even if you don't use them. Too many open credit cards at one time can hurt your score, but having several old accounts that you don't use can help improve your debt-to-income ratio.
4) Only Apply for Credit When It’s Needed
Many retailers offer their own credit cards, and will offer a discount on your purchases if you apply (and are approved) at the point of sale. Before applying for that store’s credit card, read the fine print since the interest rates are often much higher than those offered by major credit card issuers. Apply only for new credit if you need it, as too many credit inquiries can lower your credit score.
5) Separate Your Accounts after a Divorce
It’s common for a couple to obtain joint credit card accounts and co-sign for various types of loans. If a couple gets divorced or separates, both parties remain responsible for any outstanding amounts on the loans. It's important to remember to separate your accounts, either by closing the joint accounts or having one person's name removed. It will probably become necessary for one or both parties to re-establish their independent credit.
6) Correct Inaccuracies in Your Credit Report
One of the fastest and easiest ways to quickly give your credit score a boost is to ensure that everything in your credit report is correct. If your credit report contains inaccurate information, you can dispute the inaccurate items through the credit bureaus; if the information isn't verifiable within 30 days, it must be removed from your credit report.
7) Avoid Bankruptcy If At All Possible
There are a lot of myths about bankruptcy, however, when it comes to your credit score, filing for bankruptcy is one of the absolute worst things you can do. If your credit score hasn’t already dropped as a result of late payments, missed payments, charge offs and/or collections, when the bankruptcy is listed on your credit report, you will notice an immediate drop in your credit score, sometimes as 200 points, or more. In addition, bankruptcy remains on your credit report for up to 10 years, which can continue to negatively affect your credit score.
8) Avoid Transferring Balances Onto One Credit Card
Transferring your high interest credit card balance(s) onto a single card with a low rate can make a lot of sense and save you thousands of dollars in interest charges, however, it can also lower your credit score temporarily.
9) Negotiate with Your Creditors
Instead of skipping a handful of payments or defaulting on a loan, contact the creditor as soon as a problem arises and try to negotiate a lower payment or interest rate. If they turn you down, seek help from a credit counseling or debt management program before you start missing payments or making late payments which can follow you on your credit report, and lower your score, for up to seven years.
