Ways to improve credit scores

Looking for ways to improve credit scores?

Having a high credit score can mean the difference of thousands of dollars of saved interest expense compared to others with a lower score. For example, if you improve credit score results from the credit bureaus, even a few points can make huge difference in the interest rate you will pay for a home purchase.

The most commonly used credit scores available to lenders are FICO scores, which is a scoring method created by Fair, Isaac & Co...FICO!

These FICO scores are provided to lenders by the three major credit bureaus: Equifax, Experian and TransUnion.

Before we get into some tips how to improve credit scores, it pays to review the major areas that determine your FICO score.

  • Payment history on credit and retail store cards, loans and mortgages.
  • Amount that you owe. They look at how many accounts have balances and the proportion of that balance to the credit line.
  • How long is your credit history? The longer the better.
  • New credit accounts. Applying for a bunch of credit cards all at once can hurt your score.
  • Different credit types, such as mortgages, retail loans, credit cards and installment loans.

Some methods that boost your credit score take time, months or years, and others areas to improve credit score can be made with a phone call! That said, here are tips to raise your credit score!

6 tips to improve credit scores

  1. Pay your bills on time. Your payment history is a major factor (35% of your FICO score) in determining your credit score. If you pay your bills late, or had an account referred to collections, your credit score will take a major hit.
  2. Increase your credit limit. Another large factor is the amount of your debt in relation to your credit limit. If you have a card with a $10,000 credit limit and your balance is $9,000, this will not help to improve your score. To make the debt/credit limit ratio look better, you can try to call your credit card company and request an increase in your credit limit. (Don't use the extra credit though! That defeats the whole purpose and puts you further in debt)
  3. Don't apply for many cards at once. This will not improve your credit score because this is a characteristic of high credit risk groups.
  4. Look for loans within a two week period. Every time you request a loan and the lender pulls your credit report, it can hurt your score. It is part of the FICO formula that reasons "this person is trying to apply for credit way beyond their means!". If you keep the loan process within a two week period, all of the credit report lookups are bundled in as one single request!
  5. Check for errors on your credit report. Examine your credit report for errors and contact the credit reporting agencies to fix any errors on your credit report.
  6. Pay down your debt to lower your debt to credit ratio I mentioned above. This has a twofold benefit of improving your credit score and reducing your debt.

Finding out what your is on your credit report is one of the most important things you can do, because even the smallest mistake can cost you big money. When you get a loan, one small error can mean thousands of dollars in cost to you! There are 3 major credit reporting agencies. It is important to check with each company each year to make sure that an error isn't costing you big time! I save myself the time and expense of ordering from each of the 3 bureaus and get your reports all at once for less at Credit Reporting.
Credit report from all 3 bureaus - Order a 3-bureau credit report from CreditReporting.com for $34.90. See what's in your report today to insure 100% accuracy tomorrow

 


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