1: Never Pay Late
Late payments can be the most damaging factor to your credit score. Creditors do not like to lend money to people who are not going to pay on time. When they do, they charge higher (sometimes substantially higher) interest to cover their losses.
Any payment over 30 days can significantly impact your credit score. Beyond 90 and the affect on your credit report is even stronger. Note here that a payment that is even a day past due is considered to be 30 days late in the eyes of the bank.
One way to keep from paying late is to set up automatic payments on your account Most banks allow for automatic payments to be taken directly from your bank account. You don’t have to remember when exactly they are due, because the payment is taken out automatically by the lending institution.
2: Keep Credit Cards to a Minimum
When it comes to credit cards, the fewer you have the better. However, creditors do like to see you with more than one card. 3 cards is the preferred amount. Less is not necessarily bad, but more can often be seen in a negative way by creditors.
The negative effect isn’t just from the active credit cards that you have, once you fill out the credit application the negative effect is noticed. While you might think it is a good idea to apply for all of those credit cards that come to you in your mailbox, this is a bad idea. If you are looking for a new credit card, do your research and find the ones you think it is best to apply to. Don’t just fill out a bunch of credit cards applications at once, take your time.
3: Keep Outstanding Debt to a Minimum
The less outstanding debt that you have at any time, the better your credit score will be. Even if you have relatively low outstanding debt and the payments are quite manageable, it is better to pay off these debts as quickly as you can. Once the debts are completely removed your credit score will improve.
For your credit cards, it is best to keep all your cards at about a 30% debt ratio. Having some debt is good (obviously you must pay it off), but don’t let the amount of debt grow too near to your limit. This is worrisome to creditors and will bring down your credit score.
Sometimes in order to pay down the debt you will have to control your spending habits in order to pay off more of the debt.
4: Time Can Have a Positive Impact
Just as time can have a negative impact when it comes to late payment of bills, it can also have a positive impact. If you have reduced your debt, are paying all of your bills on time and are keeping yourself clean, the longer you continue forward the more your credit score will increase.
Remember it is never too late to improve your credit report. Even if you score is extremely low, as long as you pay off your debts, keep yourself straight and don’t let yourself slip again, your credit score will keep on improving. The longer the better.
5: Regularly Check Your Credit Score and Watch for Inaccuracies
The first way to know just where your credit score is at is to check it. Today less than 1/3 of consumers know their credit score. However it is very easy to find your credit score.
Some credit reporting companies offer free copies of your report. While this report can be useful, remember that this is only from one company, and may not necessarily reflect your credit score with the other two credit reporting companies, nor does it represent your FICO score, which is the most commonly used credit score.
If you would like a copy of your FICO score (the most commonly used credit score), you can go to www.myfico.com. They offer copies of your credit report for only $45.
Once you have a copy of your credit report, read it. Learn why exactly your score is where it is at. If there are any inaccuracies in the report (remember even credit reporting companies can make mistakes), contact the company and correct the error. Inaccuracies can greatly affect your credit report even when it is not warranted.
Improving your credit report improves your financial standing when you go into a bank for a loan or a mortgage. It makes you look better to credit card companies when you are applying for a new card. The better you look to them, the more likely you are to be approved and the lower interest you will pay.
One of the biggest problems many consumers face is being able to pay their bills on time. Remember, though, that as your credit score improves lenders will be happier with you and charge you less interest, thus actually lowering your monthly bills, making it easier for you to pay each month.
These are 5 simple ways to start improving your credit report. Once you have a copy of your credit report in your hand, you can learn if there is anything else keeping your score low and go about correcting these errors. A strong credit report is part of a strong financial