You may feel alone in your troubles maintaining a good credit score; but the truth is that several million Americans have a hard time obtaining mortgages, credit cards, and other lines of credit due to a low credit score. A credit score can always be improved. The better your score, the more trust a financial institution has in you while lending; leading to lower interest rates and higher flexibility.
The best way to start improving your score is to know where you have to start. If you look around, you can easily find a comprehensive credit report for free, but it may be tougher to find your FICO score. If you find that you don’t have a quality credit score (generally seen as above 750 or so), you can benefit from a variety of the following steps to improve your credit score.
A popular falsehood floating around is that maintaining a balance plays a critical role in having a good credit score. That’s not necessarily true, but maintaining a credit card (and good standing with said card) is good for you. Why? Because if you properly use a credit card maintained by an organization that reports to the credit bureaus, those credit bureaus will provide you a score that reflects the positive reports they receive. Depending on the country (the United States for example, has three credit bureaus), you should try to find a card that reports to as many or all the credit bureaus if possible.
There are two different variations of credit. The first is installment, which includes auto payments, mortgages, student loans for tuition, etc. The second is revolving credit, mostly referring to credit cards. You want to show credit institutions that you’re responsible with both kinds. Securing an affordable loan that you know you can pay back will benefit your credit score. Just make sure the lender is an institution that reports to all the credit bureaus.
Of the two variations of credit, you should focus more on paying down your revolving credit. Keeping the balance of your credit cards below 10% is an amazing feat that never goes unnoticed by creditors. The most effective way to do this is to pay down the cards with the highest rate first, then moving on to the rest. Make sure that you use your cards scarcely. Large balances, regardless of your ability to pay them off, can hurt your score. This is because the balance on your credit statement is reported to the bureau. They aren’t clairvoyant; they don’t know that you have $3,000 saved up to pay off the balance two days after the statement was created.
If maintaining a percentage of your balance limit sounds like too much micromanagement, most credit institutions offer alerts for various thresholds, allowing you to automate the management of your balance. One thing to keep note of is that charge cards (credit cards that require you to pay off the entire balance at the end of the month) aren’t a variable in the calculation of your FICO score. Whether you struggle to keep up with your charge cards, or zero out their balance with ease, know that they won’t be used in the FICO formula.
Older credit cards are at risk of being left off your credit reports. Make sure you keep the balances active on old cards, or else you run the risk of not having their activity reported to credit bureaus. Make sure to give those cards some run on one of your date nights!
Another thing to remember is that credit institutions reward loyal customers. If you had a rare incident occur that might have affected your credit score, make sure you lay out your side of the story in writing, and send it to the credit institution. They may make an adjustment to your credit history, purely out of the good of their hearts! To take things further, a long history of missed payments can have their due dates adjusted retroactively; if you’ve been maintaining a long streak of on-time payments.
Disputing bad spots on your account doesn’t have to be limited ones that aren’t your fault; If you feel you were charged unjustly (say a utility company overcharges you for a bill), make sure you follow up on your dispute. Some lenders have been known to simply forgive old lending disputes; especially when the company has since merged with another, and already has enough on their hands keeping track of all the records.
The disputes that really matter to credit bureaus are late payments, collections, and other negative balances that don’t truly belong to you. Also on the list are underreported credit limits, incorrectly listed due dates ( when you pay on time, and it’s listed that you didn’t), and negative items that should have since fallen off your report (due to age – seven years in the United States). Just because an item is wiped from your report, doesn’t mean that it didn’t affect your credit score. Make sure you keep up to date with such items.
If you are diligent enough, you can easily raise your credit score using the aforementioned steps!
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