Tips to Increase Your Credit Score: How can I improve my credit score?
As we all know having good credit is extremely important in this country. It’s almost as if having good credit is more important than actual cash in some instances. It is very easy to ruin your credit and very difficult to improve it, however it’s very possible. Stay dedicated and recognize that there is no immediate way to boost your credit score. Follow these steps below for some ways to increase your credit score over time.
Pay bills on time
Payment history has the biggest impact on your credit score, which is why making those payments on time make up 35% of your FICO score calculation. Missing a payment, even by just a few days will have a lasting impact on your credit score. If you have missed payments, get yourself back on schedule. After time negative impacts will begin to diminish and your good payment history will raise your credit score. Set up your bills or payments on auto-pay, because this is always a good option to ensure payments are made on time.
Make Frequent Payments
Make small micropayments throughout the month. You want to keep payments that are due at the end of the month low because this will help increase your credit score. It also shows a good a payment history on your behalf.
Dispute credit report errors
Once a year you can request a free credit report from Equifax, Experian, and Transunion using annualcreditreport.com. Review your report closely for any mistakes. Dispute any missing or incorrect claims and information. Remember, negative marks should only stay on your report for 7 years.
Lower your debt
The ratio of debt owed to available credit is 30 percent of your FICO score. This is called credit utilization. High outstanding debts will lower your credit score. Pay down as much debt as you can. If you have debts in collection, make a payment agreement and start paying it off. Experts recommend keeping your card usage below 30 percent of your limit.
Keep cards open
Closing out cards that are maxed out is not a good idea because it will increase your credit utilization ratio, which as a result will decrease your credit score. Your debt will remain the same, while your available credit will decrease. These cards will also show a longer credit history, so it is never a good idea to close out credit cards.
Get a secured credit card or become an authorized user
This is a great option for someone who is starting to build credit. With an authorized user account someone with a long record of good credit will add you as a user on their account. You will receive your own card and payments made on the card will help to increase your credit score. A secured credit card is when your card is backed by a cash deposit. The card will still work like a regular credit card, requiring monthly payments. Additionally, after using the card responsibly for typically 1-3 years, depending on the terms, the money will be returned and your will receive a line of credit.
In Conclusion, Things to Remember
- There is no quick fix to improving your credit, despite the offers from some companies.
- Paying off a collection will not remove it from your report. Derogatory marks remain on your report for 7 years. Don’t dig yourself in to a larger hole by making large payments above your means. Make a payment arrangement that you can afford.
- Pay off cards with the highest interest rates first.
- You can re-establish credit history by opening new accounts and paying them off responsibly. This will raise your score over time. But be careful not to open too many accounts, as this may be hard for some to maintain.
- FICO score is what 90 percent of top lenders use to determine credit approvals and interest rates. You can check your full credit report, with no penalty or fee, once a year.