There are many credit score improvement tips and tricks out there, but if you focus on just two things – paying your bills on time and using your credit cards responsibly – they will make the biggest impact on your score. This is because payment history and credit utilization account for the majority of your FICO scores.
Lenders want to know that you will pay back what you borrow. That is why a good credit score is so important. There are several factors that go into your credit score, but the most important are:
1. Amounts Owed: Your credit utilization rate – how much of the total available credit you use – makes up 30% of your score. You should try to keep your utilization under 30%, especially if you have a low credit score. 2. Length of Credit History: The length of your credit history is 15% of your score. The longer you have a credit report, the higher your score. 3. Credit Mix: Having a mix of different types of credit (credit cards, auto loans, mortgages) is 10% of your score.
4. New Credit: Lenders are cautious when they see someone with a recently opened credit account. This can lower your credit score because it signals that you are desperate for credit. Opening new accounts will also reduce your average age of accounts, which is another factor in your credit score.
5. Repossessions and Bankruptcies: Paying off or settling a debt in collections will raise your credit score, but it may take some time before the positive effect shows up on your credit report. Bankruptcies and repossessions will remain on your credit report for up to seven years.
The best way to improve your credit score is to follow good financial practices and then monitor it regularly. You can check your own credit report with each of the three nationwide consumer reporting agencies. You can also sign up for a free service like Experian Boost(tm) that will link to your bank accounts and automatically track your utility, cell phone and streaming service payments, helping you build credit over time.
There are many other ways to improve your credit score, but these are some of the most effective and easiest to implement. Just be sure to start with a clean slate by reviewing your credit reports and addressing any inaccuracies. Then, get in the habit of making on-time payments and keeping your utilization below 30%, and you will soon see your credit score soar. If you are not seeing the progress you need, don’t hesitate to reach out for help. A qualified credit specialist can review your files to find out if there are any errors that could be dragging down your score. They can also help you dispute those items and get them removed from your reports. Visit our blog to learn more about how a qualified credit specialist can help you get on the right track with your credit score. credit score improvement