Your Finances; Your Future

Improve Your Credit Score

Simple Ways to Raise Your Credit Score
You probably know the importance of a high credit score, as many companies – from lenders to insurers to cell phone service providers – use it to evaluate your credit risk. In today’s tough economy, keeping your credit score high is as important as ever, as your ability to secure a loan or refinance your home for a better mortgage depends on it.

With a little discipline, raising your credit score and keeping it high does not have to be difficult. Following are some tips for people who want to raise their credit scores:

Don’t Be Late With Your Payments. When it comes to raising or maintaining your credit score, the most important thing you can do is pay all your bills on time. The "pay by" date is the date by which your payment must be received. When you’re paying your bills, be sure to allow sufficient time for mailing to avoid a late fee. You may want to consider other payment options, such as online payments or pre-authorized debit, which are fast and free. Plus, you save money on postage.

Avoid Carrying a Balance. If you can pay your bills in full and avoid carrying balances on your credit cards, your credit score is likely to increase. High balances are bad for your credit score. Even if you pay more than the minimum and all of your bills on time, high utilization of credit is typically a sign of financial stress and may lower your credit score. If you must revolve your balances, keep them to a small amount of your available credit.

Minimize Inquiries. When you apply for credit, the lender pulls your file. That’s called an inquiry and it will be recorded on your credit history. Too many inquiries within a short period of time may have a negative effect on your credit history and score. So if you’re planning for a big purchase, like a home or a car, keep excess inquiries off your credit history by not applying for other loans or opening up credit accounts while you’re in the process of shopping for the loan for that purchase. And when you’re shopping for that home or car loan, make all your applications within a two-week period. Then all the inquiries will count as one (as opposed to multiple inquiries), with only a five-point hit to your credit score.
Make Multiple Micropayments in a Billing Cycle. If you want to know how to repair your credit, it’s a good idea to pay a portion of your bills each week or even half of it every 2 weeks. You’ll create good payment habits and feel satisfied knowing that you’re building credit and keeping your card balance low. It’s ideal to train yourself to make multiple micropayments especially if you handle your payments electronically through the card issuers banking portal.

Pay Off Your Largest Debts First. As simple as it sounds, paying off your largest debt isn’t as common as you may think. If your credit is damaged, focusing your payments toward your highest amount of debt will help teach you how to fix your credit. Let’s assume you have money set aside each month to pay off your card. You need to decide which one is worth the most to pay off. For example, let’s pretend you have a card that you barely use and don’t have a high balance on it, and you have another card that you have used for years and have been slow about paying back. You probably have accumulated quite a bit of interest on your higher balance card because you haven’t reduced the balance you owe in a long time. Therefore, it’s probably for the best that you use your money to lower the card with the highest balance and interest.

Closing Old, Paid Off Credit Accounts. This may seem like a good idea at first, but it’s actually the opposite of what you want to do. Closing old credit accounts can show up on your credit report and make your credit history look bad. If you want to know how to improve your credit score, you should become aware that keeping an already paid off account open shows creditors that you’re reliable and a good risk.

In Conclusion. Having a good credit score doesn’t have to be such a daunting task. If you have money management skills and can keep up with your balance, your credit score will improve. The key thing to remember is to pay the credit card balance, keep the balance low, and only apply for credit card accounts as needed.