How to Improve Your Credit Score

If you are like most American consumers, you think about your credit score every time you need to open a credit card, or make a major purchase such as a home or vehicle. However, you may also be of the mindset that you are better off not knowing what your credit score is, just in case the news is bad.

 No News Is Bad News

As far as your credit score is concerned, staying in the dark is always the worst option. In fact, the more you know about your credit, the better off you will be. In many cases, consumers find mistakes on their credit reports, due to the huge amount of information that is sent to credit reporting agencies from a wide variety of providers, there are bound to be a few glitches in the system – and you would not want that happening to you. There have even been cases of mistaken identities, as in another name and credit history pops up instead of your own! This is something you absolutely want to avoid and get cleared up as soon as possible. So, remember, step one to improving your score is knowing your score.

 Getting a Fresh Start

While you can never really get a clean slate with a credit score, there are many things you can do to begin again on the right foot if your credit history is a bit unstable.

  • First, resolve to make some serious changes in how you handle your finances – attitude can be everything.
  • Cut up the credit cards. Begin to take small steps towards improving your score by reducing the number of unnecessary credit cards you have. For example, if you have a tendency to open a new credit card every time you shop, stop the habit, and perhaps close the accounts you really do not use on a regular basis. Keeping some credit card accounts open and a low balance that is regularly paid off is acceptable. As long as you are always making your payments on time, having credit cards will not hurt your credit score, in fact, it can help show you are a trustworthy person to extend credit to.
  • Stay up to date. This should go without saying, but you should do everything in your power to make your payments in full, on time, every time. Late payments or long-term disputes remain on your record permanently, even after you pay them, so it is best to avoid these types of behaviors altogether if possible.
  • Stay in communication. If you have a mistake on your credit report, make sure it is corrected right away. Each credit agency has a way to send in disputes and make corrections to ensure every consumer has a score that reflects their true history. Likewise, if you have run into financial trouble, make certain you contact your creditors before you ever miss a payment. They may be willing to make certain concessions, such as deferring payment for you, or setting up an alternative payment plan.

 Be In It For the Long Haul

If your credit score is already lower than you would like, the above tips will help only in the long term. Do not think that by paying off all your debts and closing a bunch of credit card accounts will magically make the credit score number jump higher. A credit score is more like a report card of your entire credit history, so any short-term actions will have to be sustained for the long run if they are to be useful in getting a higher credit score to reflect your newfound creditworthiness.

 Also, if you are relatively young, or have few instances of having used credit, it will likewise take time to “build” a credit report with positive examples of paying your debts on time. If this describes you, you may want to open a low-balance credit card, and use it sparingly – always paying off the balance right away, so you do not get used to increasing the amount of debt you have.

Tell us how have you improved your credit score?

Thursday, February 11th, 2010 Credit

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