Five Tips for Increasing Your Credit Score
Believe it or not raising your credit score is not as hard as you think. It’s a well known that when you have a high credit score lenders will give you lower interest rates on everything from home loans to credit cards. If your credit score drops below 620 just getting a loan or credit card offer with reasonable terms can become a difficult chore.
In the United States today there are over 30 million people who have credit scores under 620. If that’s you, you may be wondering what you can do to raise your credit score.
Below are five simple tips that you can use to raise credit score.
1. Obtain copy of your credit report
Getting a copy of your credit report is a great idea. If there is something on your report that is wrong, having it removed will almost instantly make a difference. If any errors are noticed, make sure you contact the reporting credit bureau immediately to remove any erroneous information.
Your credit report should be provided by the three major credit bureaus: Trans Union, Experian, and Equifax. One thing to note is that each service will provide you with a different creditscore.
2. Pay Bills On Time
Your payment history makes up about 35% of your credit score. Missing just one months payment on anything can likely knock anywhere between 50 to 100 points off your credit score.
The best way to begin rebuilding your credit is to pay your bills on time.
3. Pay Down Your Debt
The issuer of your credit card reports your balance monthly to the credit bureaus. This will be reports regardless of whether you pay off a balance in a few days or if you carry it month to month
Many people do not realize that credit bureaus do not distinguish between those who carry a balance on their cards and those who don’t. So by charging less to your credit cards you can raise your credit score even if you pay off your credit cards each month.
In addition, lenders also rather see a lot of room between the amount of debt on your credit cards and your total credit limit. Therefore, the more debt that is paid off, the wider that gap becomes and the better your credit score gets.
4. Do Not Close Old Accounts
In the past, many were told to close old accounts if they weren’t using them. However, with today’s scoring methods the result of closing accounts could actually hurt your credit score.
Closing out old or paid off accounts lowers the total value of credit available to you and makes any balances you have appear larger in the credit score calculations. Closing out your oldest accounts can actually shorten the length of your credit history makeing you less credit worthy in the eyes of lenders.
If you are trying to minimize identity theft and closing your old accounts will give you peace of mind, the good news is it will only lower you score a minimal amount. Just by keeping those old accounts open you can raise credit score for you.
5. Stay Away From Bankruptcy
The single worst thing that will destroy your credit score is bankruptcy. Bankruptcy will lower your credit score by 200 points or more and make it very difficult to recover from.
Once your score falls below 620, any loan you persue will be far more expensive. A bankruptcy on your credit record can be reported for up to 10 years.
Bankruptcy will limit you only to high-interest lenders who will squeeze out high interest rate payments from you for years.
It is best to avoid bankruptcy and seek credit counseling if necessary. When choosing credit counseling over declaring bankruptcy you can raise credit score over a much shorter period of time.
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