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How To Improve
Your Credit Score
There are many things in life that are very important. Something that many
Americans overlook is their credit score. Credit scores are incredibly crucial,
as they dictate how much of a loan you may be eligible for, how much interest
you’ll pay and what credit cards you may qualify for. They even influence how
much of a student loan you or your child could be eligible for.
Most Americans don’t know that they qualify for a free credit report each year.
This credit report details any outstanding debts they may have, plus tells them
what their credit score is. If you haven’t already taken the time to get your
free credit report, please do so now. Once you know what your credit score is,
you’ll know what to improve.
If your credit score is less than satisfactory, you’ll probably want to take the
steps necessary to improve it. In this article, we’ll be going over the steps to
take to improve your credit score. By improving your credit score, you will make
your reputation better which will allow you to secure necessary loans at good
interest rates.
Tip #1: Pay your bills on time
One of the leading reasons why credit scores are hurt is because bills are not
paid on time. Thus, one of the easiest ways to improve your credit card score is
to simply pay your bills on time. If you can, you may even want to pay your
bills a bit ahead of time. Doing so will tell creditors that you are faithful
about paying your debts back and will also increase your credit score.
Tip #2: Don’t Carry A Lot of Debt
The average debt an American carries is around $8,000. While it is assumed that
as long as you pay the bills on time, you’ll have a good credit score, this
isn’t always the case—especially if you have a lot of debt. Try hard not to
carry too much debt and, if you already have a lot of debt, make efforts to pay
it back as quickly as possible. By carrying too much debt, you are only making
yourself look bad.
Tip #3: Make Payments Above the Minimum
One common assumption is that as long as you make the minimum payment on time,
your credit report will be good. That’s not really true. As a responsible credit
card user, you should strive to make payments above the minimum. Not only will
it help your credit score, but it will also allow you to pay off the debt
quicker. By paying just the minimum payment on a $4,000 debt, for instance, it
may take you as long as 20 years to pay it off. However, if you pay just $10
above the minimum, it won’t take you that long to pay of the debt. So always try
to pay more than the minimum to help reduce your debts quicker.
Tip #4: Take a Close Look at Your Credit Report
Many people assume that the credit report is always correct. Occasionally,
though, mistakes may be made which hurt a person’s credit score. Have you
noticed any inconsistencies on your credit report? If so, contact the creditor
associated with the debt or your local credit agency and report the issue. In
most cases, the creditor/credit agency will remedy the problem and your credit
score will be raised. Correcting inconsistencies on your report is by far the
easiest way to improve your credit score.
Tip #5: Make a Habit of Consistently Paying Bills on Time
Your credit score will not improve overnight. It usually takes a lot of time and
good habits to improve your credit score. Establish a history of paying bills on
time (and ahead of time) and of making above minimum payments. After a period of
time, you will earn the reputation of being a good person to loan to, and, as a
result, you will have a higher credit score.
Tip #6: Don’t Apply for Lots of Credit at Once
People are bombarded with new credit card offers all the time. While it may be
OK to sign up for a new credit card here and there, it is a bad idea to sign up
for several at once. This sends a signal to creditors that you are desperate for
credit and are a risk to loan to. This also reduces your credit score. Resist
the urge to sign up for many credit cards at once and don’t overextend yourself.
Tip #7: Never Exceed 35% of Balance Limit
When given a $3,000 credit limit, for instance, many people try to use as much
of it as possible. That’s really not a good idea, as using as much as possible
creates a debt that is unmanageable. One of the keys to achieving a great credit
score is to learn how to effectively manage debt. You should never exceed 35% of
the credit limit. So if you have a $3,000 credit limit, don’t use more than
$1,050 of it.
Tip #8: Pay Off Debt Instead of Transferring It from One Place to Another
Ever seen a credit card offer with a low transfer rate and entertained the
thought of transferring other credit card debt to the new card? It’s something
that many Americans consider and it is something to avoid if you intend on
improving your credit score. This is because transferring one debt to another
card makes you look bad because it shows that you weren’t able to pay it back
one way and had to resort to moving it around. That’s why you should just keep
the debt in one place and pay it off, rather than moving it all around.
Tip #9: Don’t Close Accounts if You Still Have Debt Remaining on Them
Closing accounts before they are fully paid is a huge mistake to make and it
hurts credit scores. If you are planning on not using a certain credit card
anymore, you should wait to close it until after you have paid it off. In order
to keep yourself from charging, simply cut up the card into pieces and keep it
in a drawer. One other thing to remember is to never close an account around the
time of a loan, as this can also harm your credit score.
By doing the above things mentioned, you can improve your credit score and your
reputation.
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