By Greg Quincy
Having a high credit score can mean the difference of thousandsof dollars of saved interest expense compared to others with alower score. For example, if you improve credit score resultsfrom the credit bureaus, just a few points that increase yourcredit score can make huge difference in the interest rate youwill pay for a home purchase. It pays to increase your creditscore!
The most commonly used credit scores available to lenders areFICO scores, which is a scoring method created by Fair, Isaac &Co...FICO!
These scores are provided to lenders by the three major creditbureaus: Equifax, Experian and TransUnion. Before we get intosome tips how to improve credit scores, it pays to review themajor areas that determine your FICO score.
1. Payment history on credit and retail store cards, loans andmortgages. 2. Amount that you owe. Credit agencies look at howmany accounts have balances and the proportion of that balanceto the credit line. 3. How long is your credit history? Thelonger the better. 4. New credit accounts. Applying for a bunchof credit cards all at once can hurt your score. 5. Differentcredit types, such as mortgages, retail loans, credit cards andinstallment loans. 6. How many late payments do you have?
Now, with the playing field laid out, let's work to boost yourcredit score! Some methods that boost your credit score taketime, months or years, and others areas to improve credit scorecan be made with a phone call right now! That said, here are the7 tips to raise your credit score!
7 tips to improve credit scores
1. Pay your bills on time. Your payment history is a majorfactor (35% of your FICO score) in determining your creditscore. If you pay your bills late, or had an account referred tocollections, your credit score will take a major hit.
2. Sign up for online banking and make sure your regularrecurring bills are paid automatically. This way you will notforget a payment that will wind up reducing your credit score.
3. Increase your credit limit. Another large factor is theamount of your debt in relation to your credit limit. If youhave a card with a $10,000 credit limit and your balance is$9,000, this will not help to improve your score. To make thedebt/credit limit ratio look better, you can try to call yourcredit card company and request an increase in your creditlimit. Don't use the extra credit though! That defeats the wholepurpose and puts you further in debt!
4. Don't apply for many cards at once. This will not improveyour credit score because this is a characteristic of highcredit risk groups.
5. Don't ever close an open credit card account. If you pay offa credit card down to a zero balance, leave it open. Rememberthat a positive factor for your credit score is how muchavailable credit you have at your disposal when compared to yourcredit balance, in addition to the length of your credit history.
6. Apply for loans within a two-week period. Every time yourequest a loan and the lender pulls your credit report, it canhurt your score. It is part of the FICO formula that reasons"this person is trying to apply for credit and loans andpossibly be trying to live way beyond their means!" If you keepthe loan process within a two-week period, all of the creditreport lookups are bundled together as one single request!
7. Check for errors on your credit report. Examine your creditreport for errors and contact the credit reporting agencies tofix any errors on your credit report.
If you take action and follow these tips, you will be able togive your credit score and immediate boost and graduallyincrease it even more as time passes. The major keys are to payyour bills on time and reduce your debt amounts when compared toyour credit limit. This has a twofold benefit of improving yourcredit score and reducing your debt.
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