How to Improve your Credit Score, Here are 10 tips:

how to improve your creditThese methods you can use to help improve your credit score and get yourself back on track and help  you if you are looking to purchase a new home, apply for a vehicle loan, even financial aid for college – or even if you just want to clean up your credit history.

1. Obtain Your Credit Report from the Credit Bureaus

The first step to improving your credit score is to know where you stand with each credit reporting agency. Because lenders may report your credit data to only one of the credit bureaus, it is important to get your score and credit report from both TransUnion and Equifax

2. Examine Your Credit Reports thoroughly

It is very important to review your credit report for errors. If, for instance, you do not recognize one of the accounts that are showing in the Trade lines section of one of your credit reports, did you know that you could and should immediately dispute the entry? If you aren’t sure how, then contact us and we can provide you with a sample Credit Dispute Letter that you can send to the credit bureaus. 

3. Resolve Collection or Delinquent Accounts

Check the Collections/Judgement section of your credit report. This section shows any delinquent accounts that may have been sent to collection or any late payments you may owe.  Contact the collection agencies or accounts that show delinquent and attempt to pay them and bring them to current and up to date status if possible.

4. Pay Your Bills

Seems pretty obvious, but by paying your bills on time and in full, you eliminate the chance of making late payments or missing them entirely which will negatively affect your credit score. This is an integral part of improving your credit score

5. Pay off Revolving Credit Balances

If you have a balance owing on your credit card and you pay it off, you will lower your debt to income ratio and, in turn, improve your credit score. By paying more than your monthly minimum payment, you will also incur less interest paid and pay off your credit card balance quicker. Also, by paying more than your minimum payment, you are demonstrating that you have the capacity to repay, which will further work towards improving your credit score.

6. Don’t Apply for More Credit

Nowadays we see booths and stations armed with sales people enticing us with free gifts and promotions to get us to apply for Credit. The other day I was in the Airport and walked past 3 bank credit card application booths on my way to my connecting flight.

But the truth is one of the worst things you can do when trying to clean up your credit score in your attempt to improve your credit score is to take out additional revolving loans (credit cards) or apply for lines of credit. You will decrease the effectiveness of your other efforts to boost your score, as well as pay higher interest rates before your score is back in a “Good Credit” range.

7. Don’t Close Unused Accounts

While it may seem like a good idea to close the accounts of credit cards you aren’t currently using, having available credit lines with no balance can actually help improve your credit score. It shows that you are able to maintain credit/trade lines without having large balances. A good rule of thumb to follow is to keep 2 or 3 open revolving lines of credit if possible that have no current balance

8. Separate Your Accounts After a Divorce

Even after obtaining a legal divorce, you are still required to pay off any joint credit accounts. Remember, that with most credit card companies the primary card holder’s credit is impacted only, and not the secondary borrower. You can however apply for your own credit card with the same company and they will take into account the previous history, since they have the information on file. But the point here is that  it will also be necessary for each party to re-establish their own credit. When doing this, start off slowly and build up your independent credit over a few years.

Resist the urge to open multiple lines of credit quickly after your divorce, as this can have a negative impact on your credit score and rating.

9 Avoid Excessive Amounts of Credit Inquiries

Many people don’t realize that each time a lender, business or prospective employer runs your credit report, your credit score is lowered slightly, in some cases up to 5 points. Only have your credit report run when absolutely necessary. You can receive your free credit reports from the major credit bureaus once a year with no deduction in points to your score.  Avoid excessive credit inquiries to keep your score in good shape. With all that being said, do not stress too much when the need for a credit check arises. Realistically 4 to 5 pulls a year is deemed reasonable, especially if you are searching for a new mortgage, or purchasing a vehicle, etc. So long as there is a reasonable explanation for the credit being checked (other than  you are seeking as much credit as possible), you should be ok. Keep this in mind as you work your way towards improving your credit score.

10. Don’t Consolidate Balances on One Credit Card

By moving the balances from multiple credit cards to just one card, you will likely be maxing the credit limit of that card, which will negatively impact your credit score.  Unless you can significantly save on your interest by doing this, its better for your overall credit score to keep smaller balances on several cards.