Steps To Improve Your Credit Score

Before you can improve your credit score you’ll need to know where you stand. Don’t worry about getting your credit score. Rather, just grab your credit report instead. You can get one free credit report from annualcreditreport.com every twelve months.

A note about getting your credit score. Regardless of what you may have heard, it’s not free. Sure, they will let you see your credit score for free, but you’ll also have to sign up for credit monitoring for a fee. Depending on which company you choose, you may be able to sign up for a free trial, get your credit score and then cancel without being charged.

Now let’s discuss how to raise your credit score. Earlier we had discussed what a credit score is comprised of. This makes up for your overall credit score:

– 35% payment history
– 30% amounts owed
– 15% length of credit history
– 10% types of credit
– 10% new credit.

So if you want to improve your score and make a real impact, you’ll have to concentrate on the first two items on that list. Payment history counts for a lot, so make sure you make your payments on time. If you know you’re going to be short, at least make the minimum payments so you’re not listed as delinquent. If you’ll have the money soon, but don’t have it quite yet, call your creditors and ask if they can move due date back a bit.

As far as your amounts owed are concerned, every payment you make should be lowering your overall debt. But it’s not just about the total that you owe. Rather, it’s about what percentage of your allowable credit you are using. This is called your credit utilization rate. Say you have a credit limit of $10,000 and you’ve charged up $9,000. That’s 90% which is extremely too high.

One strategy for quickly raising your credit score is to open a new credit card. If you get a $2,5000 credit limit yet don’t use any of it, you are lowering your credit utilization rate which will raise your credit score.

Cutting up your credit cards may sound like a good idea, but not if you want to raise your score right away. Your score may actually drop if you cancel and close a credit card account. This is because you may be inadvertently raising your credit utilization rate and will be affecting your length of credit history by canceling an old credit card.

Paying off an installment loan will also give a boost to your credit score. Sometimes people concentrate a lot on revolving loans such as credit cards. But installment loans like auto loans are also important too. It’s a good idea to have a mixture of credit accounts on your report. Having a successfully paid off account on your report looks great and will boost your score. You may want to get a personal loan (that doesn’t show up on your report) to pay off an installment loan.