How Improve Your Credit Score

Trying to improve your credit score can be like running a marathon with a drifting finish line. Every time you think success is near, it moves another mile away. Having a good credit score is important in the world we live in. It is just not feasible to come up with the kind of money you need to buy a home or a car in a short period of time. Most lending companies base a loan off of how much you can put down and what your credit score looks like. If you have a history of late payments or even if you have never used credit before you could have a difficult time securing a loan.

In order to improve your credit score you first have to understand what influences your credit score. The two main factors that determine your credit score are payment history and amount owed. If you have never taken out a loan and keep your bills paid on time you will have no history of credit at all, which can be just as detrimental as having bad credit. So, if you have never considered getting a credit card but need to have good credit in order to buy a new home, you might consider applying for a credit card with a manageable interest rate just so that you can build positive credit. If you have a credit history that is unfavorable, here are some tips to help you improve your credit score so that you can qualify for those higher-limit cards.

Request a copy of your credit report from Equifax, TransUnion and Experian. You may have similar scores with each of the three credit bureaus or you may not, since each agency has its own method of calculating your score. This is the best way to see what might be dragging your credit score down. If you notice a discrepancy or a charge on your report that shouldn't be there you can request that it be removed and updated.

Keep one credit card and maintain a monthly balance. This doesn't mean get a credit card and then pay the balance off before the end of the month. This does nothing for your credit. By keeping a balance on the card and paying the minimum monthly payment you are showing that you will make payments on time but still play to use the card on a regular basis.

Don't expect immediate results. Building your credit back takes time, and this doesn't just imply a few months or even a year. It can take two years or more to see an measurable difference in your credit score. But the effort is well worth the time.

Pay off old debts. By allowing old debts to stay on your credit report you are negating the effects of your efforts to improve your credit rating. This is because the companies that reported your debt as uncollected continue to update their information on a regular basis. Contact the debt collector and arrange to pay the bill or settle for a lesser amount to get it cleared off of your credit history. The exception to this is if your debt is nearing the seven or ten year mark. Most debts are deleted from your credit report after seven years.

Limit your cards to one or two. You may think that since paying one credit card is helping build your credit that you can speed the process up by getting more than one card and paying each balance down at the end of the month. While this sounds like a great plan, it can actually negatively effect your credit, since each card company is reporting the balance due and payment history to the credit bureaus. You not only run the risk of missing a payment, which is reported as a failure to pay, or having too many revolving lines of credit at one time, which also lowers your score.

It seems simple. you get credit cards, spend a little money, pay them off and improve your credit score over time so that you can extend your buying limit. But it is rarely that simple. Life happens. People get sick and cars break down. Money that you might have put aside to help you pay down your credit cards might have to be used for other things. And still the credit reporting bureaus report your inability to pay without regard to your personal problems.

By following these tips and keeping yourself limited to one card and realizing that the process is going to take longer than you anticipate, you can slowly rebuild your credit and improve your credit score so that you can qualify for a higher limit card. Subscribe to this email to get our free ebook that will provide more tips on how to improve your credit score.

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