Your credit score could cost you, or save you a lot of money. Fortunately there are several key steps you can take to improve your credit score. Here's a quick how-to on a better credit score:
- Pay your bills on time.
Even if pay the minimum amount due, it is important to pay your accounts on time! Your payment status plays a big role in determining your credit score.
- Avoid using too much of your available credit!
Scoring models consider lower balances to be a positive factor. When you are "maxed out", using virtually all of your available credit, your score can be adversely affected.
- Pay down your debts!
Again, the more debt you pay off, the more available credit you will have and this will reflect positively on your credit score.
- Try to keep your new applications for credit at a minimum.
Too many new applications for credit over a short period of time can significantly lower your credit score. This could be especially damaging to you, if this occurs at the same time that you are looking to finance a new car, or taking on a new mortgage!
- Be careful about closing your old accounts!
Even if you have an old account that you've forgotten about, and not used for a long time, you should think twice before closing it. Why? Old accounts can help your credit score, because they demonstrate how long you have used credit - and scoring models factor this in to your credit score. By closing an old account, you may be negatively impacting your "length of credit history". Even if it seems like a good idea to close older, more established accounts to consolidate your balances, you could very well be lowering your score by reducing the credit history you present to lenders. Closing old accounts can also reduce the overall amount of available credit that you present to lenders.
- Compare your credit reports from all three credit bureaus.
Because there are three separate credit bureaus that maintain your credit information on file, and companies where you apply for credit often use separate credit reporting agencies, you should make it a habit to check your credit reports from all three credit bureaus. You can do this once each year for free from each credit bureau at www.annualcreditreport.com. For your convenience, you can also get a 3-1 Credit Report that provides a side-by-side comparison of all three of your credit reports: Equifax, TransUnion, and Experian.
- Monitor your credit reports on a regular basis.
Credit Reports and credit scores are changing on a regular basis - as new information is filed. Not only do you want to make sure your credit reports are accurate to make sure you get the credit you deserve, but monitoring your credit can also help provide you with a "first line of defense" against identity theft. For example, if someone else opened up a credit card account in your name, monitoring your credit on a continual basis could help you discover this sooner, rather than later - especially if a new credit account that you didn't open appeared on your credit report. Should you discover information on your credit report that you believe to be inaccurate, you have the right to dispute the information. You can do this by writing to the appropriate credit bureau at the addresses below, or you may go to the appropriate website for each bureau and file an on-line dispute form. It is important to monitor your credit reports on a regular basis because errors in your report may lead to lower credit scores.
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