“Good credit is a cornerstone of your financial profile, enabling you to finance major purchases, such as a home, education, or car,” says John Danaher, president of TrueCredit.com (a web subsidiary of credit bureau, TransUnion). He adds that not knowing your credit score can mean higher interest rates, which translates into less money in your pocket.
With a higher credit score, you qualify for better interest rates, higher credit limits, and more types of credit. Your score reflects the way you use credit, and there are no tricks or quick fixes to getting a good score. However, you can raise your score over time by demonstrating that you consistently manage your credit responsibly.
10 Tips To Improve Your Credit Score
1. Pay your bills on time.
If you have a history of paying your bills on time, you’ll have an easier time getting a mortgage loan, car loan, or credit cards. Even if you’ve had serious delinquencies in the past, a recent history (24 months) of on-time payments carries weight in credit decisions.
2. Keep credit card balances low.
High outstanding debt can pull your score down.
3. Check your credit report for accuracy.
Inaccurate information on your credit report can be cleared up easily. Contact the original creditor and the credit bureaus to clear up an error so that the inaccurate information won’t reappear later.
4. Pay down debt.
Consolidating your credit card debt or spreading it over multiple cards will not improve your score in the long run. The most effective way to improve your credit is by slowly paying down the amount you owe.
5. Use credit cards—but manage them responsibly.
In general, having credit cards and installment loans that you pay on time will raise your score. Someone who has no credit cards tends to have a lower score than someone who has already proven that he can manage credit cards responsibly.
6. Don’t open multiple accounts too quickly, especially if you have a short credit history.
This can look risky because you are taking on a lot of possible debt. New accounts will also lower the average age of your existing accounts which is something that your credit score also considers.
7. Don’t close an account to remove it from your record.
A closed account will still show up on your credit report. In fact, closing accounts can sometimes hurt your score unless you also pay down your debt at the same time.
8. Shop for a loan within a focused period of time.
Credit scores distinguish between a search for a single loan and a search for many new credit lines, based in part on the length of time over which recent requests for credit occur.
9. Don’t open new credit card accounts you don’t need.
This approach could backfire and actually lower your score.
10. Contact creditors or our credit counselor if you’re having financial difficulties.
This won’t improve your score immediately, but the sooner you begin managing your credit well and making timely payments, the sooner your score will get better.
These ideas won’t create a dramatic improvement in your credit score overnight, but over time, they will. Remember, it takes time to develop a strong profile. Once you’ve done it, you’ll find it easier to apply for credit and favorable interest rates. We’re here to help with our free credit review available by visiting any branch.