Improve Your Credit Score
There are lots of ways to improve your credit score. Some are common sense. Others may seem counterintuitive at first. Even if you currently have bad credit, by following these suggestions, over time, you can improve your credit score.
Pay your bills on time.
Mix it up
Having a mix of credit sources is better than having just one type. That’s one of the reasons why you should consider using an installment loan, such as a Signature Loan or Line of Credit, rather than having it all on credit cards. These loans have other advantages, as well, such as low fixed rates and the convenience of automatic payments from your checking account, so there’s never the risk of late payment fees.
This is a big one. Your payment history makes up 35% of your credit score. One way you can avoid missed or late payments is to set up automatic bill payments. Check with your creditors and utility providers; many now offer this service. You can also set reminders for yourself. Write down on a calendar when bills are due and check it regularly. There are also any number of software programs that will allow you to set up reminders. Finally, be proactive. If you haven’t received a bill, call the company to see if it’s been sent. Or if you’re having trouble paying a bill, contact your creditor before the due date.
Responsible credit is better than no credit.
Using credit responsibly is better than having no credit history. Also the longer your credit history, the better. That’s why you should consider keeping your oldest credit card account open, even if you no longer use it. If you close it, your credit report may not indicate the full length of time that you’ve had credit. Creditors would rather loan to someone who has demonstrated the ability to use credit wisely over a period of time than to someone with a short credit history or no history at all.
Keep accounts open.
As with your oldest credit account, consider keeping more recent accounts open as well, even if you don’t use them or have paid off your balances. This may seem counterintuitive as you may have assumed that the fewer cards you had, the better. The fact is, your score, in part, is based on the ratio of credit you’ve used (how much you owe) to the amount of credit that is available to you. Closing accounts lowers the amount of credit available to you.
Don’t open credit accounts you don’t need.
Opening new accounts, especially multiple accounts in a short period of time, can raise red flags on your report. If you decide to close those accounts later on, your score may take yet another hit. For example, the advantage of opening a store credit card account in order to receive a one-time discount may be negated by the longer-term disadvantage of lowering your credit score.
Multiple credit inquiries can lower your score.
If you are financing a large purchase, such as a car, don’t ask for a quote on a loan rate until you are certain you’re ready to buy. That’s because when you apply for a loan, an inquiry is made of your credit score, which tends to lower your score. If you’re shopping around for the lowest rate on a loan, do it within a short amount of time. This will be interpreted as shopping for a rate on a single loan, rather than multiple loans.
