Education

How to Improve Your Credit Score

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Having a good credit score is important. It can provide access to the best interest rates and premier companies. The higher your score the better your chances are of obtaining a mortgage and an auto or personal loan. If your credit score is currently below 650 there are several ways to improve it and bring up over 700.

Excessive Debt

Carrying too much debt can cause your score to fall below a desirable level to lenders. Thankfully, there are a few ways to reduce your debt. For credit cards, you can pay one off and then move onto the next one. If you have too many credit cards to pay more to one or to pay just the minimum payments due, you can apply for an installment loan through a reputable lender. 

With loans and debt consolidation, you can manage your debt in one easy monthly payment, typically one that’s less than the total of your individual accounts and at a lower interest rate.

Making Payments on Time

One of the best ways to improve your credit score is to pay your monthly bills on time. Your payment history represents 35% of the final credit score. It has the greatest impact. Unfortunately, late payments can affect your score for up to seven years. If you have a few currently on your report, contact the creditors or collection agencies and make arrangements to settle the outstanding debt. It will help you raise your score faster. 

Keep Credit Balances Low

When a credit card balance exceeds 30% of the credit limit it counts against you and will lower your credit score. Paying off credit cards each month, bringing them to a zero balance is the best way to maintain an excellent credit score. If you cannot do this and are in good standing with your creditors, ask them for an increase in the line of credit. This will allow you to keep your credit in good standing while working towards paying the balances off. 

Use Credit Wisely

It’s easy to acquire more credit cards when you have good credit. Unfortunately, if you don’t use them wisely, you can end up thousands of dollars in debt with no way to pay them off. Instead, when there’s something you want, save the money to buy it cash. This way, you won’t run up high balances and you’ll be able to enjoy the perks that come with having them. 

Limit Credit Inquiries

While you’ll only take a 10% hit for making too many inquiries, if your credit score is marginal, it can make a huge impact on your ability to buy anything on credit. Hard inquiries such as applying for things like a mortgage or a car loan can remain on your credit report for up to two years. Chances are good that if one lender denies you, another will provide the same results.    

No Credit

There are people who have a poor credit score simply because they have no credit history. This often pertains to young adults leaving home for the first time. If this is the case for you, establishing credit can become frustrating. However, there are lenders who offer secured credit cards. You put a deposit on the card and use the money to buy things. It helps to build credit slowly. After a year of making timely payments, you can apply for a regular card.

Your credit score is a three-digit number. The higher the score the better the chance of obtaining a loan for things like a home or an auto. It can also determine whether you have access to the best insurance, get a good-paying job, and have to put a deposit on utilities.

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