Tips on Improving Your Credit Score

Your credit score is more important than you may realize. Potential lenders use this score decide whether or not they will approve you for a loan. In addition, your credit score can greatly impact the interest rate you receive if you do receive a loan. Therefore, it is a good idea to improve your credit score, no matter how good it may already be.

Tip #1: Choose the Right Types of Credit

The types of credit you have extended to you will have an impact on your overall credit score. Work to develop a mixture of credit cards and installment loans, which are loans that have a fixed payment. Maintaining a mixture of different types of loans can raise your score if you prove that you are capable of managing the loans responsibly. While it is good to have a mixture of loans, it is not a good idea to open new accounts just to obtain a mix. In addition, having too many installment loans can lower your score because the payments remain the same until the balance is paid. You should also keep in mind that closing an account does not remove it from your credit report. Therefore, it may still be used by a lender to determine your overall credit score.

Tip #2: Dont Create Too Much Debt

Getting too deep in debt makes you a higher risk. Therefore, you need to keep your debts as low as possible. Your credit cards in particular need to be kept down. Having too much debt on your credit cards in relation to your credit limit will lower your score. In addition dont simply move your debt around from one credit card or loan to another. Instead, pay it off. It doesnt help to have the same amount of debt carried on fewer accounts. Keeping unused credit card accounts open can also improve your credit score because it improves your debt to credit limit ratio.

Tip #3: Keep Inquiries Low

Make sure to keep inquiries into your credit report low. Opening too many accounts or having too many inquiries into your credit report in a short period of time can lower your credit score. If it is absolutely necessary to inquire with multiple lenders such as when shopping for a home loan, try to keep all of the inquiries close to the same time period.

Tip #4: Build a History

Time is on your side when it comes to improving your credit score. The longer you have a positive credit history, the greater your score becomes. If your credit history is less than three years old, it is particularly important to keep credit inquiries to a minimum. Otherwise, potential lenders may get the impression that you are not responsible with your finances.

Tip #5: Be Responsible

The best way to improve your credit score is to be responsible with your finances. Make sure to pay your bills on time. Late payments have a huge adverse effect on your credit score. If you already have past due bills, get caught up and stay caught up. If you know you will have a problem paying a bill, contact the creditor immediately and work out a payment plan. Often, you can negotiate a plan that will keep the creditor from reporting the late payment on your credit report. If you are in serious financial trouble, obtain the services of a non-profit credit counselor.