Your credit score can tell a lot about your financial history – it takes into account years of your past behavior! Regardless of what the reason may be, here are some tips with regards to improving your credit score.
1. Pay down your balance
When it comes to your credit score, things aren’t as simple as paying what you owe. In fact, it is how much you owe compared to how much credit you have! This ratio is called credit utilization. As an example, if your credit limit is $1,000 and your balance is $500, your credit utilization will be 50% and if you’ve maxed out the $1,000 limit, your utilization will be 100%.
Now, while there are many theories behind the best conceivable credit utilization level, they all revolve around a ballpark of 30%; in our example, you should never have more than $300 charged if your limit is $1,000.
2. Open a new account
Having your credit increased is great, but if your current credit card issuer refuses to grant you a credit increase, you should think about applying for a card from a different issuer. This will help you with your credit utilization rate. In the mentioned example, someone with $1,000 in credit and a balance of $500 will have a 50% credit utilization rate, regardless of whether the amounts are on a single card, or spread over a couple.
Of course, opening multiple accounts at once will raise a lot of eyebrows; you will look like you are in a spending frenzy. One or two new cards will do it.
3. Don’t leave out your old debt
Your credit report should accurately reflect your history. Don’t remove the car that you’ve just finished paying off from your credit report. Now, while negative items are bad for your credit score, arguing to get old accounts off your report just because they’re paid, isn’t advisable.
Debt that you’ve handled well and paid as agreed is a good debt – it is excellent for your credit. How so? Well, it is evidence that you are able and committed to pay what you owe. The majority of debts will disappear from your credit report after seven years and some are simply best-kept one for as long as possible!
4. Keep your credit report clean
Start by requesting a free credit report from each of the big three credit reporting companies: TransUnion, Experian, or Equifax. You are legally entitled to one free annual report, regardless of what situation you might find yourself in. It is important that you print it or save it to your computer or device; it will serve as a reference for keeping track of your ongoing credit report.
Once you get your hands on the report you should start examining everything; look for any accounts that show late payments and/or unpaid bills – should this information be inaccurate, the report will tell you where to send a potential dispute. Professionals at Clean Credit, for example, offer an obligation-free assessment and boast a ‘no win no removal fee’ policy, so hiring experts can be of tremendous help when looking to repair your credit history.
A clean credit report is important for more than your credit score – employers are in full right to pull credit reports when hiring.
5. Pay twice a month
If you think you’re doing great because you pay off your card every month (even if it’s maxed out), you are wrong. Here’s where the problem lies: your creditors are reporting balances to the credit bureaus once a month, which means that if your balance is huge each month, it’s going to seem like credit overuse.
The best way around this is breaking up your credit card payments and making them at least twice per month, but most importantly – if you can pay it in cash, pay it in cash!