4 Simple Ways to Improve Your Credit Score

The Famous Credit Score

Your credit score is a three-digit number that tells financial institutions how likely you are to pay back borrowed money.  It factors in payment history, total debt, number of credit requests, and more. A good credit score is essential to keeping financial options open and taking certain big life steps, like buying a house or a new car.  However, if your score is low or non-existent, it is possible to get it back up, although it can take some time if there is a lot of damage.

Pay Bills on Time

The first and most obvious way to improve your credit score is to pay bills on time.  This refers specifically to loans and credit payments, but it can also include utilities and other payments – don’t make exceptions!  Since lenders are trying to evaluate whether you will pay them back on time, show them that you will sustain a good payment history.  For example, setting up automatic withdrawal is a great option.You could also print out a list that you check off every month. Even if you have missed payments in the past, start immediately and your credit will begin to repair itself as your last missed payment retreats into the distance.

Keep Balances Low

Try to keep balances low.  Some things, like mortgages or student loans, take time to pay down.  But for other lines of credit, especially credit cards, do not let the balance get too high.  The credit report factors in the length of each loan, how high each one is, and how long they stay high.  The higher the balance, the higher the payments, generally, so a lender is less likely to offer credit if they think you are going to be overextended by your other loans.

Don’t Apply for Too Much Credit

Every time you make a “hard inquiry” on your credit, it affects your score.  A hard inquiry is an official check of your credit to see if you qualify for a loan. It does not include free checks through your bank or credit card company.  If you are constantly applying to borrow money, it can make you look irresponsible and raise red flags at the credit agencies.  Only take a hard inquiry when you really need it.

Inspect the Report and Dispute Inaccuracies

Lastly, check your credit report regularly. When you receive a credit report, be sure to read all the information that comes with your score and make sure it is correct.  If your identity has been stolen, you might not find out without checking your report.  If you did not open a new credit card this month, but it shows up under your name, you have the right to dispute it.  Disputing a charge does not affect your credit score; it is your right and obligation.  Maybe getting that already-paid bill off your report will be just what you need to improve your score.