Many people that do not have good credit think that it is too much work and too hard to improve their credit score and get it to the level that they want. Which for everyone should be an excellent credit score. But the truth is that it is not that hard to improve your credit and by following some simple steps and knowing these credit score factors you will see you score improve over time.
1. Make a list of all of the bills that you pay each month involving mortgages, car payments, credit card bills, and anything else that you make monthly payments for. And then list what date they are due each month.
By doing this you will be able to see clearly what bills you have each month. By missing a payment you hurt your credit score and then you will have to spend more time improving it. After you have done this you should contact each of the institutions that you make payments to and try to set all of their due dates at or around the same date. This way it will be harder for you to miss a payment since they are all due at the same time. This factor accounts for 35% of your credit score and missing a payment hurts it a lot more than making it on time. Making all of your payments on time and it will make improving your credit score a lot easier.
2. Pay off any debt that you have if possible.
The amount that you owe contributes to 30% of your credit score and this is the area that can have the greatest effect on improving your credit score. If you can pay off your house or your car then go ahead and do so and that will increase your “credit utilization” factor. If you have credit cards, then you want to check the available credit on them and stay under 30% of that limit. So if you have a credit card with a $1,000 credit limit you don’t ever want to have more than $300 owed on it. If you find that you are always going over this 30% amount, then call your credit card company and ask them to raise your credit limit. If you have unused credit cards don’t cancel them all at once. The credit limit on those adds to your available credit and therefore lowers the total amount of credit that you are using. You also don’t want to open too many credit cards at one time as you will see in the next factor about improving your credit score.
3. Length of Credit History Accounts for 15% of your Total Score.
The total amount of time that you have each line of credit plays a factor in your score. So when you open a new credit card, yes your total credit limit will increase, but it will take time for your credit score to show that as the length of time for your new credit card increases. During this time your credit score ranges up and down for a while and will then level off. This length of credit factor is why it is ok not to cancel unused credit cards and why staying on top of and making payments on time for long-term loans like a mortgage or a car is beneficial to working towards improving your credit score.
4. Don’t look Desperate for Money
The rest of your score is based on the new lines of credit that you are opening and the type of credit that you already have. If you are trying to apply for loans and open up credit cards in a short period of time than you will look desperate for money and that you are not financially responsible. It is also good to have more than one type of credit account open. For example you could have a loan on your car and then have 1 to 2 credit cards that you all make payments for on time. By keeping a nice balance between the type of credit lines that you have and making payments on time you will be on your way to an excellent credit score.
Now Go Out and Start Improving Your Credit Score
After all this you may ask, why is your credit score important and what is a good credit score? Your credit score is a grade on how responsible you are with borrowing money and is measured on a credit score scale from 300 – 850. And having a good credit score isn’t something that you can just be proud of. A better than average credit score will get you better interest rates on future loans and allow you to be more qualified to get rewards credit cards that you can take advantage of. And just because you do not have a very good credit score now doesn’t mean that you will never be able to take advantage of these things. Just follow these steps and as time passes you will see you credit score improve.