Taking care of your credit score is more important than ever. These days, your credit score can be used for anything from applying for a mortgage to consideration for a new job. Unfortunately, many of us don’t think about the ramifications of a poor credit rating until it is too late.
Improving your credit score is a must if you want to get the best deals on credit cards and interest rates. If you know that you’re going to be in the market to take out a loan, you want to start fixing your credit score as quickly as possible. Ideally, you should be preparing to improve your credit score for months (or even years) ahead of time. So, if you are looking to apply for credit, start working to improve your credit score now.
What is a Good Credit Score
A credit score, also known as a FICO score, is a number assigned by one of three credit reporting agencies which measures how well you handle paying back debt. Although each agency may report a slightly different number, each number should provide potential lenders with a pretty good idea of whether or not you would be a good risk. Credit scores range from 300-850, with higher scores representing a better risk.
Generally speaking, here is how the numbers break down:
- Bad Credit: 629 and below
- Fair Credit: 630-690
- Good Credit: 691-719
- Excellent Credit: 720+
According to CreditRepair.com, the Fair Credit Reporting Act, or the FCRA, is a federal law that “protects individuals and businesses by limiting the ways in which credit information may be shared.” In addition to protecting your information, this act also gives you the right to request your credit score and report at any time. Simply contact one of the three credit reporting agencies or one of a number of free credit reporting websites.
Tips for Improving Your Credit Score
Now that you know what the numbers mean, the next step is to find ways to improve your credit score. Here are a few simple tips to help you get your credit ship pointed in the right direction.
One of the biggest factors that determine your credit score is your credit utilization percentage. Essentially, this compares the amount of credit that you are using to the amount of credit you have available. Your credit utilization actually accounts for a whopping 30% of your score; thus, the lower you can get your percentage, the better off your credit score will be. The best way to decrease your credit utilization is to pay down your debt. The less you owe, the lower your credit utilization becomes. So, give yourself enough time to pay off debt prior to applying for any new credit.
Bonus Tip: Make sure to eliminate balances on as many accounts as possible. You are better off having a larger balance on one card instead of having smaller balances on multiple cards (provided the large balance has the best interest rate, obvi).
Pay on Time
The largest portion of your credit score – 35% in fact – is determined by your payment history. This number includes whether or not you pay your bills on time, if you are ever late, how often you are late, and whether or not you have any major defaults. If you want to improve your credit score, you absolutely must pay your bills on time, every time! Late payments remain on your credit report for 7 1/2 years, so it is of vital importance that you are never, ever late. If you’ve been late, see if you can get those late payments removed from your history. If not, begin building your credit by showing that you can pay on time…starting now!
Lengthen Your Credit History
Your length of credit history accounts for 15% of your credit score, so it is a good idea to leave some old credit accounts hanging around. Even if you don’t use it, you might want to keep an old credit card for this reason. Leaving the account open with an available balance can help to prove that you have a history of using credit in a responsible manner.
Wait it Out
Sometimes improving your credit score is just a matter of waiting. Over time, certain negative marks against your score will fall off of your report. In addition to late payments and other delinquencies, you need to pay attention to how often you are applying for credit. Each time you apply, a lender has to make a “hard inquiry” on your credit score. These hard pulls stay on your credit report for two years, and each inquiry will cause your score to drop slightly. Although their effect generally wears off after 6 months, you’ll want to keep an eye on these if you are planning to use credit in the near future.
Although it can seem like a chore to improve your credit score, it certainly can be done. Be sure to give yourself enough time to get your score where it needs to be prior to applying for any loan. With some perseverance and discipline, you will eventually get the results that you are looking for.
Need Help Repairing Your Credit?
If you need help repairing your credit, it’s important to find a company you trust. The people at CreditRepair.com and Lexington Law want to help. You can get your FREE credit summary and consultation right away by using our unique links and phone number – created especially for Club Thrifty readers – below.
CreditRepair.com or Lexington Law
Phone: (844) 346-3281
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