Savings/Credit information-Savings and Credit

How to Improve Your Credit Score

Do You Know What Your Credit Score Is?

Many people don’t. If you’re one of them, your credit may be suffering because of it. With just a little research, you could improve your credit rating in just a few months. The greatest improvement is slow in coming, but the first step is to learn your credit score.

Is Your Credit Free of Blemishes?

Even the most financially responsible consumers may have information on their credit reports that lowers their score, some of which may be invalid. You may have inaccurate claims of missed payments, or even reports of debt you no longer have (or never had). Such claims are not common, but they do happen, so be aware of what is on your credit report—you cannot dispute a claim that you are unaware of.

Get Your Credit Report for Free

Under the Fair and Accurate Credit Transactions Act (www.annualcreditreport.com), everyone has a right to request their credit score reports for free once per year from each of the three major credit bureaus, Experian, Equifax and TransUnion. Your credit report is based on information these bureaus receive about you from your creditors, such as credit card companies and banks.

How it Works

Credit reports include your payment history, the length of your credit history, the types of credit you have, and the amounts that you owe. The credit bureaus use this information to assess the level of credit risk you constitute. A high credit risk will constitute a lower score. The lowest rating is 300; the highest 850. Consumers with the highest scores benefit from lowest interest rates. The lower your score, the higher your interest rate will be. Those with the lowest credit rating will be ineligible for most, and in some cases all, forms of credit or loans. 700 and above is generally considered very good, but over 760 is ideal.

Keeping Your Credit Score High

Your best strategy is to manage your credit responsibly. Pay off your credit card balances and other debts as quickly as possible. Pay your bills in full and on time. Doing this consistently for a number of months will improve your credit rating, regardless of any problems you may have had in the past.

Tips to Get You Started

Check your credit report with all three of the major bureaus (Experian, Equifax and TransUnion) at least once a year, making sure that the information on all three reports is accurate. It is important to check all three reports, as the information may vary somewhat from bureau to bureau.

Pay your bills on time. Late payments will have a negative impact on your credit score. If you have had problems in the past, paying your bills on time for just a few months can make a difference in your score.

Start managing “problem” credit card accounts responsibly, rather than closing them. Thinking of taking scissors to your cards? It can actually help you to retain them, as long as you make your monthly payments on time. If you begin to manage your debt responsibly, you could be perceived as a lower risk than someone with no credit history at all, or someone with a poor credit history followed by a long period of inactivity.

Keep balances low on credit cards. A large amount of outstanding debt can lower your score. “Maxing out” your credit cards, for instance, could lower your average score by as much as 70 points. Keeping your balances low will also save you money on interest charges in the long run. The best way to use your credit cards is to only charge as much as you can pay off at the end of the month.

Try not to open new credit cards. Don’t apply for new credit cards. The number of months your credit cards have been open (your “account age”) is a factor in determining your credit rating, and a number of new accounts will lower your average account age, potentially lowering your score by as much as 10 points.