The Secrets to Improving Your Credit Score

The Secrets to Improving Your Credit Score

Credit Score


Your credit score is one of the most important numbers associated with your identity. It determines your ability to purchase a car or buy a house; it can also determine if you qualify to rent an apartment. Increasingly, employers and insurance agencies are turning to credit profiles to determine if one is a worthy risk.

That’s why it’s so important to have a good credit score. Even if your credit score is down in the dumps, it can be rehabilitated if you know the right steps to take.


Understand Credit Scores

At its core, your credit score is simply a numerical representation of your ability to borrow at present time. More specifically, your credit score shows how likely you are to default on money you borrow today. How that determination is made depends on a variety of factors. This video from Experian helps explain how your credit report is structured and shows a snapshot of your financial situation. Visit website to learn more about your credit score.


While the exact criteria for credit scoring varies among the credit reference agencies, there are similarities among the three. The most important thing to remember is that on-time payments and your balance in relation to your available credit are the most important factors of any credit score. If you pay on time and don’t carry high balances, your score will likely be high. If your score isn’t high, you can take the next step and figure out what happened.


Check Your Credit Report

Checking your credit reports may seem like an obvious thing to do as you try to improve your credit, but it’s important to know what to look for. The main thing you want to see is anything that doesn’t belong. It’s very common for errors to appear on credit reports, so make sure erroneous information isn’t getting between you and a good credit score.

If you see anything that looks funny, you can file a dispute online. Be sure to retrieve your reports from all three credit bureaus — Experian, Equifax and Callcredit – as there may be differences among them from time to time.


Keep Your Accounts Open

Some people choose to close out older accounts that they no longer use. In the eyes of the credit reference agencies, this is a mistake. They believe that a long history of good credit management is desirable, and that lengthy histories with banks are good indicators of future repayment. The average age of your credit accounts is a determining factor in your credit rating, so keep your cards open and keep that number as high as possible.



Avoid Overapplying For New Credit

Applying for credit is a natural part of life. However, you must apply with consideration for the credit reference agencies. Every time you apply for new credit, an inquiry appears on your credit file. Too many inquiries in a short period of time gives the impression that you’re desperate for new lines of credit, causing lenders to think you’re strapped for cash. Limit your credit applications to only those that are necessary, and avoid frivolous applications whenever possible.


Contact Your Lender

If you feel like your balances aren’t going down despite on-time payments, your interest rate may be to blame. Call your credit card company and see if there’s anything they can do to help. A lower interest rate can help you to attack the principal balance that lies beneath the monthly interest payments, putting a dent in the high balances that deflate your credit score.

However, it’s critical that you pay on time and continue to pay the amount you’re paying now. A lower payment in conjunction with a lower interest rate defeats the purpose of the reduction.


Photo credit: Simon Cunningham
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