The Top 5 Ways to Improve Your Credit Score

Your is essentially a “snapshot” of how much of a credit risk you are. It therefore carries a lot of weight when it comes to lenders determining whether or not they feel you are credit worthy. If they feel you’re a risk, then often times you will be denied. In some cases, you will still be extended credit… though just not as much as someone with a higher credit score or you will receive a much higher interest rate.  For these reasons, it’s important to try and achieve a high credit score and maintain it, whenever possible. If you already know that your credit score is not as high as you’d like it to be, there ARE things that you can do to improve it!

Here’s the Top 5 Ways to Improve Your Credit Score:

1.  Get a copy of your credit report and make sure it’s accurate. Since your credit score is determined by what has been reported on your credit report, it stands to reason you should check it first.  I did a post last month on understanding your credit report, so be sure to check that out if you haven’t already. It gives you all the details about how to get a free copy of your credit reports and what to look for.

2. Pay your bills on time. Experts say that 35% of your credit score is based on whether or not you pay your bills on time.  It is, therefore, very important that you do your best to take care of your obligations and pay on time!  Paying your bills on time also ensures that you don’t get slammed with late fees and other penalties that will make it even harder to pay your bills.  Remember, if you don’t have the money to pay a bill that has come due, consider taking out a payday loan to pay it before it’s too late. As long as you budget to repay the loan plus the fee incurred on your next pay date, paying your bill on time and improving your credit score is worth that payday loan fee.

3.  Avoid Excessive Credit. If you’ve got a ton of credit cards, a huge amount of debt, and a zillion lines of credit out, you may look like a risk on your credit report because they see that as overextending yourself.  This boils down to not taking on more credit than you can comfortably afford to pay.  Because statistical studies show that those with high debt loads often face financial difficulty when met with life challenges (like divorce, unemployment, or illness), your credit score will be lower if you are deemed to have an excessive amount of credit.

4. Pay down your debts. The rule of thumb is that you should not use more than 50% of the credit you have available.  That means if you have a credit card with a $1,ooo credit limit, you should try to pay down your balance to at least $500 to elevate your credit score.  If you can reduce your balance by even more, or even pay it off, that’s even better.

5. Have a range of credit types. The types of credit you have factor into your score as well.  Lender want to see that you can handle a variety of credit types.  There are real estate or mortgage loans, installment loans (like a car loan or a student loan), and credit cards, etc.  So try to secure different types of credit over time to make your profile appear more balance and your credit score will get a boost as well.

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