Before we talk about improving your credit score, let’s make sure we’re on the same page regarding what a credit score is. You’ve more than have heard of these three companies at one time or another: Experian, Trans Union & Equifax. These are the 3 major credit bureaus. They each have a numerical algorithm that generates scores from 350 to 850.
Since these 3 credit bureaus are non-biased, 3rd parties, these scores are used to calculate the credit worthiness and/or character traits. It’s not only lenders (i.e. mortgages, auto loans, personal loans, student loans, credit cards, etc…) that utilize these scores. Insurance companies, landlords, employers and others may also pull your credit score. It’s for these reasons that have a good credit score is vitally important, which brings me to the topic of this article…
4 Ways to improve your credit score!
The 30% Rule: While paying down installment debt (car, school, mortgage, etc.) can improve your credit; paying down or paying off revolving debt, such as credit cards, can cause a quick jump in your credit score. The key is to get and keep your balances below 30% of your credit limit on each card. For faster results, start with cards with balances closer to their respective credit limits, as opposed to those cards with the highest debt. If you pay off any credit cards, do not close your accounts. Doing so may actually cause your scores to drop!
Can’t afford to pay down your balances to 30% of the available credit limit? Ask your creditors for an increase if the credit limit. Or, you may want to consider spreading it around to other cards with the intention of keeping the balances under that 30% threshold. Do this only if you truly need a quick improvement because using credit cards to pay down other credit cards can be costly. It could become a slippery slope that continues to plunge you into further debt plus many times there are fees associated with this type of transaction.
Know Your Credit History
If you intend to close out some credit cards, if at all possible, keep the ones that you’ve had the longest. Having a long history of on-time payment behavior is a very positive thing. So, even if the credit card you’ve had since high school may have the worst interest rate, consider keeping it to improve your credit score. Just use it once per month and pay it off before interest accrues.
Make Corrections
Your credit is calculated based on the information supplied by your creditors. If you have a HELOC, make sure it’s listed as a mortgage or an installment account on your credit reports and not a revolving debt. If you had a bankruptcy, be sure that all items associated with the bankruptcy are being reported correctly. Unfortunately, not all creditors play by the rules. Some will list a balance due even after the bankruptcy cleared it with the hope that you’ll eventually pay it. Getting this corrected could increase your score by 50 to 100 points. Because mistakes like these can wreak havoc on your credit score, it’s important to monitor your credit every four to six months.
Make them prove it
If you find information on your credit report that you believe is inaccurate (such as noted above) or incomplete, then you have the right to dispute it free of charge. For the fastest results, visit the reporting credit bureau’s website and file a complaint online. Even if the reported information may be accurate, by disputing it, you force the creditor to prove it. If they either can’t of don’t prove it; or don’t do it in a timely manner, you have the right to request that the credit agency have it removed from your report. If you’d like more information on how to do this, check out this article or get a copy of our Sample Dispute Letter
For help with your credit, click HERE.
