8 Ways to Improve Your Credit Score
Bad credit can be costly. It will be harder to get approved for a mortgage or loan. You may also end up spending more money in interest in the long run. Furthermore, many employers check people's credit before they decide to hire them. Payment history, credit utilization percentage, credit inquiries, accounts in use and length of credit history are some of the main factors that determine your credit score. There are several things that you can start doing today to improve your credit score. 1. Get a Copy of Your Credit Report Before you can start working on improving your credit, you will need to look at your credit report. There may be errors on your credit report. In fact, 25 percent of credit reports have errors. One error can cause your credit score to drop drastically. That is why you will need to get any errors on your credit report corrected as soon as possible. 2. Pay Your Bills on Time Paying bills on time is one of the most important things that you can do to raise your credit score. Consistently paying bills on time shows potential lenders that you are responsibly responsible. One of the things that you can do to ensure that your bills are paid on time is to set up automatic payment. 3. Pay Off Any Past-Due Balance Late payments can stay on your credit report for seven years. However, you can improve your credit score by paying off past-due accounts. It may still stay on your credit report, but your credit report will show that the account has been paid. 4. Keep Your Credit Utilization Percentage Your credit utilization percentage is another key factor that determines your credit score. This is the percentage of credit that you are using. It is calculated by adding up all of your balances and credit limits. For example, your total credit card limit is $10,000. Your total credit card balance is $4,000. Your credit utilization percentage is 40 percent. Ideally, the credit utilization percentage should be below 30 percent. However, having a 0 percent credit utilization may hurt your credit score. Studies have shown that people who have a credit utilization percent between 1 and 20 percent have a higher credit score than those who have a credit utilization percentage of 0 percent. There are several things that you can do to keep your credit utilization low. Pay more than the minimum required payment every month. You should also monitor your credit accounts every week. 5. Do Not Get a New Credit Card Every time that you get a new credit card, your credit report is hit with another inquiry. This can reduce your credit score. It will also make your credit history newer, which can also lower your credit score. 6. Do not Close Old Accounts It may seem as though it is best for you to close old accounts if you are not using them. However, closing an old account may have a negative impact on your credit score. Closing an account can reduce your total available credit. That is why you can benefit from keeping old accounts open even if you are not using them. 7. Increase Your Credit Limit If you can control your spending, then you may want to consider increasing your credit limit. Raising your credit limit is one of the simplest things that you can do in order to decrease your credit utilization percentage. Most lenders will increase your credit limit if you have had a history of paying your bills on time. You will simply need to call and ask for a credit limit increase. 8. Become an Authorized User on Another Person's Credit Card There are several ways that you can benefit from becoming an authorized user on another person's credit card. If the person pays the bill on time every month, then you will be able to improve your own credit score. The other person's credit limit will also be added to your own credit limit. Additionally, you do not have to use the credit card in order to benefit from it. The key to getting the most out of being an authorized user is to select someone who is responsible.
Ryan Bridges is a contributing writer and media specialist for the CreditSoup. He regularly produces content for a variety of business and finance blogs, based around the transitional challenges which come with managing money and financing.
