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How to Raise Your Credit Score
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Consider your credit score your grade in a life long course
called personal finance. Unlike your grades in school, a failing or marginal
credit score can cost you money. Companies use your credit score to measure the
risk they will be taking when dealing with you and a low score means high risk
to them and that my friends is something they charge extra for.
On the flip side, when you have a higher credit score, you
are less of a risk and it is widely known that you can go borrow money just
about anywhere. This means you pay less. Improving your credit score can save
you thousands over the course of your lifetime.
Raising your credit score is not hard; it just takes time
and little knowledge about the credit scoring system. The scoring system is
designed to recognize patterns and habits of people that are close to financial
disaster. If your habits resemble those of a person on the brink of bankruptcy,
it will be reflected in your credit score.
The system also recognizes actions that are in line with
those committed by people that are not in financial trouble. To raise your
credit score, you simply need to do the things that financially responsible
people do and your credit score will automatically rise as a result.
So what is it exactly that financially responsible people
do? Lets take a look at the top 5 things anyone can do to boost their credit
score.
- Pay your bills on time and avoid having your accounts
sent to collection agencies. I know this sounds like a no-brainer but what
you may not realize is just how badly a late payment can affect your credit
score. Consider this: late payments, collections, and bankruptcies have the
greatest negative impact on your credit score.
- Keep your credit card account balances below 35% of your
credit limits. (If you have a $1000 credit limit you should try to keep your
balance below $350) If you keep your cards maxed out, creditors will view
this as a risky situation in which you are likely to give up and stop making
payments at any time.
- Do not cause your credit to be checked too often by
applying for a lot of credit in a short period of time. Each time you apply
for credit it causes a hard inquiry to be noted on your credit report.
Regardless of your reasons, too many inquiries can make it appear to creditors
that you are scrambling for access to cash due to financial trouble or that
you are overextending yourself by taking on more debt than you can handle. If
you are out shopping for one specific big ticket item such as a car - wait
until you have selected the vehicle you wish to purchase before you allow your
credit to be pulled. This will prevent several inquiries from several car
lots appearing on your report.
- Keep your oldest accounts open and in good standing.
Unless you have a specific reason for closing them, your oldest accounts
should be kept open so that your period of active credit use will remain
accurate and continue to age. This will show creditors that you are capable
of maintaining long-term good credit. Be patient and allow time to work in
your favor. The longer you can show that you pay your bills on time and use
credit responsibly the higher your score will be.
- Check your credit report every 6-12 months for
inaccuracies. The sooner you learn that something is incorrect, the sooner
you can take care of it and see a better credit score.
Click here to learn where
you can check your own credit.
There are many factors that can affect your credit score. To learn
more, take a look at this article:
Factors That
Influence Your Credit Score
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