Tips to Help You Improve Your Credit Score
Your credit score has a drastic impact on your ability to organize your future financial situation. At some point in your life, you will probably have to take a major loan, such as a mortgage. Having a higher credit score at that time will guarantee you better conditions, and you will save thousands of dollars on interest rates. If your score gets too low, on the other hand, you may not receive any loans, from any reputable institutions.
The first thing you need to keep in mind is that the score is a reflection of your history in using credits. It takes time to build it, and it takes time to improve it. Stay away from quick fixes, and especially stay away from dubious services that promise to fix your credit score for you. In most cases, they will do more harm than good, and they’ll cost you a lot of money as well.
Collection accounts remain on your report for seven years, even if you pay them off. The same happens with most public record items and delinquencies – you can’t simply make them go away, so focus on improving from now on.
Check your report from all the three major agencies – Equifax, Experian, and TransUnion. Remember you are entitled to get the reports free of charge once a year, and you can request them more often for a fee, if you need to. Analyze the reports carefully, and dispute any mistakes they may contain as soon as possible.
The two biggest enemies of your credit report are credit cards and bills. You may not have though about it, but unpaid bills get reported just like any other type of debt. If you consistently miss your payments, even for two or three days, you’ll see that reflected in your score.
Credit cards are an indicator of your ability to handle loans with maturity. It doesn’t mean that you shouldn’t use them, but you have to be careful, and to repay them in time. Stay away from the danger of revolving credits. Getting more cards, in order to distribute your debt among them, won’t help your credit history, even if many people make that mistake. The only thing you’ll achieve is to accumulate more interest rates and more debt.
On the other hand, closing all your credit cards won’t help, either. If you have no cards, credit institutions will have nothing to report about you, and therefore your score will not improve. The banks will not applaud your ability to live your life debt-free, as it’s in their best interest to grant you loans. They want you to take loans, but they also want to know you have a proven history of paying them off. Thus, the best approach is to keep the cards, and to use them once or twice a year, just enough to show they’re active, but not enough to get yourself in trouble. Of course, this means you’ll spend more on their maintenance fees, but it’s worth it.
You don’t need lots of accounts to prove you’re reliable. What you need instead is to maintain a low balance on all your accounts, for years, without failure. Focus on this, and you’ll be rewarded with great interest rates, when it’s time to get a mortgage.
