subject: Improving Your Credit Score - How Can You Do This? [print this page] How do you improve your credit score? Is a commonly asked question by people seeking financial advice, especially so in this tough economic climate. Although there is no quick fix, by making a few changes to your approach, it is possible to do. In this article we will look at what a credit score actually is, how to improve it and how long all of this will take.
A credit score is a number that represents how credit worthy an individual is. There are several credit scoring systems which are used by credit companies in the US, but the most common of all is the FICO scoring system, which rates consumers on a scale of 300 to 850 on their previous credit behavior.
Any misdemeanor such as an unpaid bill or overdue credit card payment will adversely affect your credit score. A more serious financial problem, such as bankruptcy, will heavily impact on your score and send it plummeting towards the low end. This is known as having bad credit, and can take several years to repair.
It is estimated that over 30 million people in the United States have credit scores below 620, which is significantly low enough to prevent them from being approved for many credit cards, personal loans and other financial products. So, with this in mind, how can you improve your credit score?
The first step is important but not utilized anywhere near enough: Get a copy of your credit report and check that all information held against your name is accurate. Incorrect information can be disputed, then amended or removed as necessary. Even a seemingly minor point such as a wrong previous address can have a serious negative impact on your score.
Make sure you pay your credit bills on time, every month. Although this is becomes increasingly tough when money is tight, missing payments will severely hinder your credit rating. Paying off a loan or credit card in full will give your credit score a big boost, but even making the minimum monthly repayment will give you a small increase.
Also use your credit cards sparingly, and pay using your debit card, check book or cash wherever possible. Whilst some credit card activity is good, putting everything on your card can make it appear that you are dependent on it. By keeping records of your spending you can keep on top of this. This also includes paying off your debt rather than moving it around from card to card.
Another way to improve your credit score is to be consistent. Staying at the same address, keeping the same job and staying with the same bank will all earn you points for reliability. Constantly chopping and changing can give credit providers' the impression that you are unreliable and a risk to them. Making regular applications for new cards and accounts will also have a negative impact.
All of the main ways to improve your credit score involve planning, budgeting and responsible behavior. Credit companies will only trust responsible people with their money, erratic financial behavior will get you nowhere. It is possible to totally repair a bad credit score in seven years, but follow the above steps and every month you should see a small increase.
by: William Trustey
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