Help Yourself to a Better Credit Score

It doesn’t take long for someone with a bad credit score to find out just how crippling a low credit score really is. Even businesses that don’t give you credit or loans find a reason to use your credit score to charge you more money. Take auto insurance companies, for example, they use your credit score (among a few other factors) to decide your insurance rate as if your credit score really has a lot to do with your driving ability.

Check your credit report for inaccurate information. Your credit report is the basis of your credit score. It holds all the details that make you have a good or bad credit. Since your credit score has such a big impact on how much you pay for certain services and whether certain applications are approved (like an employment application, it’s up to you to make sure your credit report is accurate. If you find errors on your credit report, you can dispute them with the credit bureau. And if the credit bureau doesn’t respond, you can dispute with the company that reported the account to the credit bureau.

Pay off your debt. There are so many reasons to pay off your debt and an excellent reason is to improve your credit score. Thirty percent of your FICO score is based on how much debt you have. The more debt you have, the worse your scores will be.

Get caught up. Your payment history has even more impact on your credit score than your level of debt – 35% to be exact. If you have accounts that are past due, they’re dragging down your credit score. Make the required minimum payment to bring the account back into current status. Unfortunately, the payments you missed will stay on your credit report, but they’ll hurt your credit score less as they get older. After seven years, late payments will fall off your credit report completely.

Be careful closing out accounts. Closing out an account, especially a credit card, can make it look like you have more debt than you actually have. Credit scoring calculations don’t just look at the amount of debt you have, they compare your current balance to your credit limit or the original loan amount.

If you close a credit card, your lender may report your credit limit as $0 which makes it look like you’ve maxed out your credit card. Even closing a credit card with a $0 balance can hurt your credit score when all your other credit cards still have a balance.

Pay your bills on time. The same way a late payment can hurt your credit score, timely payments raise your credit score. The more positive information that gets added to your credit report, the more it will help your credit score. The goal is to have your positive payment history overshadow any negative information on your credit report.

Rebuilding a bad credit score takes time, but if you make all the right decisions, your credit score will improve.

Ed O’Brien is an expert writer in personal finance, specializing in credit repair. You can find more of his articles located at CreditRepair.org.





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