Credit scores build up over years of credit and payment history. Whether you have poor, good or excellent credit, these tips will help better your score and ensure you receive the best interest rates.
Pay Down Your Balance
Roughly 30 percent of your credit score is calculated by the amounts and balances on your accounts. You will get more bang for your buck paying off your credit cards than you will paying off installment loans. Credit rating agencies see credit card spending as a sign of daily financial health--and the more debt, the more likely one is to miss a payment or default. Typically, having a balance that is roughly 30 percent of the credit limit will go a long way in raising your score. That means if you have a credit limit of $1,000, a good maximum balance to try to have is around $300. This proves to creditors that you are maintaining a close watch on your finances and are using your credit wisely. The key here is to pay off the cards that are closest to reaching their limits.
Identify False Information
Consumer credit report accuracy surveys have found that 79 percent of credit card reports contain false information. This information ranges from the inconsequential, such as a wrong address, to the harmful, such as a credit card attributed to you by accident. Get a copy of your credit report and comb over every line of it. For example, there may be 10 inquiries into your credit history in one day that you were unaware of, and this kind of activity will negatively impact your score. Call the companies that ran the checks and if your use of credit did not trigger the inquiries,call the credit rating agencies to dispute the charge. You may have triggered the inquiries if, for example, you previously shopped around for a car loan.
Ask for a Goodwill Adjustment
A goodwill adjustment is an adjustment granted to you by a creditor for being a good customer. This means that you've paid your bills on time for months or years, and are asking to have those one or two late payments removed from your record. This will not work in all cases, but if you are successful, you will improve your credit score substantially and remove negative information.
Don't Hastily Close Your Credit Card Accounts
A portion of your FICO score is calculated based on how long you've had your accounts open. Generally speaking, the longer you have an account open, the better it looks on your credit report. Maintaining credit cards is a good way to show consistency to potential lenders. Closing an account that you have not used, especially when you have higher balances, has the potential to negatively affect your score rather than help it. If you have an unused credit card, use it for about five months, pay off the balance, and then close the card. This will prove to creditors that you are making sound financial decisions, and are closing the account because you no longer need the card, not because you are seeking to quickly boost your FICO score.
Continue Using Your Credit Cards
Credit rating agencies base your future credit score on your past credit activity. A sudden drop in your use of credit will not allow the agencies to develop any new information about your spending habits. The best strategy here is to make small purchases and pay off the balance before the end of the month. This will prove you are being responsible with your credit cards.
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