July 24th, 2017 3:45 AM by Jackie A. Graves, President
you can work on improving your credit score, you'll need to understand what
goes into that number in the first place. It has five key components:
Payment history (35%), which measures your
tendency to pay bills on time;
Credit utilization ratio Opens a New Window.(30%), which
represents the percentage of your available credit you're using;
Length of credit history (15%), which
is the amount of time your various active accounts have been open;
New credit accounts (10%), which speaks to the
amount of new borrowing you're doing;
Credit mix (10%), which is the variety of
accounts you hold.
you can see, certain factors carry more weight than others, so focusing on
those can help you boost your score more quickly.
of the most efficient ways to improve your credit score is to consistently be
on time with your payments. Your payment history is the single largest factor
in your credit score, and being 90 days late or more on even a single payment
will drag that number down. If you find remembering to pay your bills a
challenge, set up calendar reminders that will help you avoid accidentally
missing due dates in the future. You can also set up direct debits with your
bank to pay certain recurring bills automatically, thus taking the chance of
human error out of the equation.
you've been late with payments because of cash flow problems, reexamine your
spending, and make sure to never charge more on your credit cards than you can
afford to pay off each month. Even if you can't always tackle your balances in
full, making your minimum payments will help you avoid black marks on your
way to improve your credit score is to eliminate some of your present debt,
which will help bring down your credit utilization ratio. Having a ratio above
30% can really hurt you, so if, for example, the sum of all your credit
lines' limits is $10,000, you'll want to keep your cumulative outstanding
balance below $3,000. If your current debts have pushed you above that 30%
threshold, paying a few of them off might help you dip back down below. Plus,
the sooner you get rid of some of that outstanding debt, the less money you'll
waste on interest charges.
new accounts won't impact your score nearly as much as your payment history or
credit utilization ratio, opening too many at once could damage your credit
score. Applying for several credit cards or loans at once sends a message that
you're heavily reliant on borrowing, which isn't what you want lenders to
think. On the other hand, if you make a point not to open too many new accounts
in too short a period, you'll show that you're a responsible borrower who uses
debt in moderation.
Credit reports aren't always
accurate. In fact, an estimated 20% contain errors. That's why it pays to
consistently check your credit report and dispute any mistakes you notice.
Unfortunately, a good 30% of Americans don't review their credit reports on a
regular basis, and those folks are really putting their scores at risk Opens a New Window..
to a Federal Trade Commission report, about 20% of consumers who identified
credit report errors saw their scores improve enough as a result of the
correction to put them in a better credit tier, which qualifies them for better
loan rates, among other benefits. You're entitled to a free copy of your credit
report every year from each of the three major bureaus (Equifax, Experian, and
TransUnion), so be sure to request yours and examine it from cover to cover.
Fixing a simple mistake could be just the thing to boost your credit score
credit score isn't something you can afford to sit back and ignore. The more
work you put into improving it, the bigger the financial benefits will be.
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