Today Credit Score, a projection of the finance capacity of an individual, which various financing instituions prefer to look at.
Even small steps can yield big results for your credit score. If your credit score is “under construction,”there’s hope: You can boost your score fairly quickly and even see improvement in as little as a month. In fact, with some concentrated effort, it is entirely possible to raise your score by 100 points or more within six months or so.
Of course, everyone’s credit situation is unique, so it’s difficult to pinpoint an exact range of improvement. But if you follow these tips, you’ll get started right away on moving that three-digit score toward a “very good” or even “excellent” credit rating.
Pay your Bills on Time, Every Time
Why is paying on time such a big deal? Your credit card payment history accounts for a whopping 35 percent of your total credit score. Miss a payment for 30 days or more, and you could get penalized anywhere between 60 and 110 points, depending on your credit score. (It’s important to note that if you’ve got a good credit score, the penalty is harsher than if you had a lower score.)
If you have missed a payment, start making on-time payments immediately. That late payment will stay on your credit report for up to seven years, but its negative impact will fade with every subsequent on-time payment.
The easiest way to avoid missing payments? Set everything to autopay—and be sure to update your information if you switch banks.
Check your Credit Report
Nobody’s perfect—and neither is credit reporting. In fact, a report by the Federal Trade Commission (FTC) indicated that 1 in 5 consumers found errors on at least one of their three credit reports.
Mistakes like outdated info and misreported late payments could be keeping your score down. That’s why you should check your credit report at least once a year to see if there are any mistakes. If you find them, reach out to the offending bureau ASAP—you should see a bump in your score (especially if you remove a false negative item like a late payment) when the correction is made.
Pay More Than the Minimum Payment
Your debt utilization—that is, how much of your available credit you are actually using—accounts for 30 percent of your credit score. Aside from paying off the entire balance, your next best option is to pay more than the minimum monthly payment on all of your credit cards, and avoid maxing out your plastic.
A low-interest balance transfer may help you pay down your debt faster, but credit experts stress that moving around debt is not the same as paying it off. Your goal is to pay your debt down; a study by FICO showed that consumers with the highest credit scores only used about 7 percent of their credit line.
Keep Accounts Open and Request Credit Line Increases
Once you pay off a credit card, you might be tempted to close it to avoid accruing future debt. Bad move. Your credit limit lowers when you close a card, so if you’ve still got outstanding debt, your debt-to-credit ratio will take a hit. Whenever possible, you want to keep that ratio under 30 percent, so until you lower that debt, keep those accounts open and in good standing—just make a small purchase every now and then and pay it off right away.
In fact, a better move is to request a credit line increase. A higher credit limit will improve your score, provided you don’t increase your debt again.
Time to clean up—and maximize—your credit score? Get started today…
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