credit score

Top 6 Ways To Improve Your Credit Score

The good news: you took the advice of all the financial experts and checked your credit score. The bad news: your score is lower then you would like. If you find yourself looking at an abysmal score, there are plenty of ways for you to start rehabilitating your credit, but some will be more effective and faster acting then others. To fix your credit score as fast as possible, follow these steps:

1. Check your credit report for accuracy

One of the first things you should do is ensure that all of the information on your credit report is accurate. Credit bureaus occasionally make mistakes, and you should also check to be sure you have not been the victim of identity theft. Correct any errors as soon as possible.

2. Make sure your credit limits appear on your report

When your credit card companies report your history to the credit bureaus, they should also be reporting your credit limit. Without a limit listed, the credit calculating software will consider your cards to be at the limit or “maxed out.” The further your balance is from the limit and the closer it is to zero, the higher your score. The software will deduct from your score in percentage zones: Any balance higher than 70 percent of your maximum limit is in the highest zone and will cause the most damage to your score. The next zone is between 70 and 50 percent, than between 50 percent and 30 percent.

Once you make sure that your balances are present on your report, work to pay down your accounts as much as possible. If you are unable to make a significant dent on your balance, distribute your balances between multiple cards, keeping all of the balances as low as possible and out of the 70+ percent zone.

3. Pay past due accounts

After correcting all errors, look for a column titled PAST DUE. This is a list of all delinquent accounts and the software the credit bureaus use to calculate your score punish you the most for these accounts. If you have limited funds, pay off these accounts first in order to see the fastest boost in your score.

4. Pay new liens or charge-offs

Any liens or charge-offs applied to your account within the past two years are wreaking havoc on your credit score. You should pay off your balances on these accounts as soon as yo
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u pay off your past due accounts. However, once those liens and charge-offs are older than 24 months, they have done all the damage they can do. Paying them off after 2 years will not help your credit score, so put all your old liens at the bottom of the pay off priority pile. Once you have paid off any of these liens, be sure your lien holder reports the account as paid to the credit bureau.

5. Do not close credit cards

When the credit crunching computer software calculates your score, it looks at the ratio between your debt and your available credit. If you have a total limit of $10,000 across multiple cards and you have charged $5,000 worth of debt, you have a balance that is 50% of your total credit limit. However, if you close one of your credit cards, say one with a $2,500 limit, you have effectively reduced your overall credit limit to $7,500 and raised your debt to credit ration to 66%, dangerously close to the 70% zone.

If you have absolutely no self control or more than 6 open credit cards, you might be the exception to this rule. The optimal number of credit cards for an individual is between 3 and 5. If you have more than 6 cards, close the ones you have opened in the last 2 years first. Then close your department store cards and the ones with the lowest credit limit, until you reach 5.

6. Keep old credit cards active

15% of your credit score comes from the age of your credit, in this case, the older the better. The logic is that the longer you have had an account open, the less likely you are to default on that account. If you close your oldest cards, you will decrease the average age of your credit and this can reduce your score.

However, just keeping the card open and in your wallet will not maintain your credit’s age. You must use each of your credit cards at least every 6 months or your cards will be deemed “inactive” and will no longer be counted by the credit calculating software. The phrase “use it or lose it” applies here, meaning you want to keep the benefits of a low balance and a positive payment history on those older credit cards. The one thing all scores over 800 have in common are a credit card that has seen more than 20 years of use.

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By: Mick Bernard

Article Directory: http://www.articledashboard.com

Mick is a Certified Credit Restoration Expert and President of Credit Strategies, a credit consulting firm in Scottsdale, Arizona. Credit Strategies works with consumers with less than perfect credit increase their credit scores so they can qualify for the best possible financing. If you’re looking for some credit restoration then conciser our credit repair program.

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Carefully, is the short answer. The more you know the easier time you’ll have getting the best deal and avoiding future financial problems. Most people who’ve been told their rating wasn’t good enough once or twice assume they have a terrible rating, so the first thing you really need to do is figure out what all those numbers mean, and decide where to go from there.

Some lenders with a lot of applications only take the best of the best, while others will still give good rates for average ratings. What your rating actually is and where you are applying matters.

Now that you’ve decided what your rating actually is, how do you get a loan with a bad credit score? Well, if your rating isn’t the best, but not too bad, I strongly suggest looking into using traditional lenders over ones meant for people with poor ratings.

Lenders that set out to take customers with poor ratings are basing their interest rates on the idea that all of their customers have terrible financial histories. This means that you are being offered an interest rate meant for someone with a worse application than yours, and you could find a better deal elsewhere.

I generally recommend finding five lenders online and comparing rates and terms. Do be sure to look over the terms because companies will sometimes make up for a low interest rate by hiding some fees in their terms because few people read them. Even if you decide to go with your local credit union (which are known for offering low rates) it’s good to comparison shop online to get an idea of what’s available to you.

However, if your rating falls below 500, I recommend finding any other way around borrowing money at all because the interest rates you will be offered will be so terrible. You’ll likely have to take a guaranteed deal, where they take any rating, and typically these rates are so high that people wind up in a cycle of debt. If you have another option, use it.

When you have a poor rating and are looking at how to get a loan with a bad credit score start by finding out what your actual situation is, and go from there.

The first step to improving your credit is to understand it! Become familiar with what scores really mean, check out the credit score scale and read about finding low score loans.

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