Improving Your Credit Score

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How do you improve the credit score? Is a regularly asked question by people seeking financial advice, especially those in tough economic climate. Although there is no quick fix, by making a few changes to your approach, it is possible to do. This article, we shall look at what a credit score is, how to improve it and how long all of this will take.

A credit score is a number that describes how credit worthy an individual is. There are several credit scoring systems which are used by credit companies in the US, but the most common of all is the FICO scoring system, which rates consumers on a scale of 300 to 850 on their previous credit behavior.

Any misdemeanor such as an unpaid bill or overdue credit card payment will adversely affect your credit score. A more serious financial problem, such as bankruptcy, will profoundly impact on your score and send it plummeting towards the low end. This is known as having bad credit and can take several years to repair.

It is estimated that over 30 million people in the United States have credit scores below 620, which is significantly low enough to prevent them from being approved for many credit cards, personal loans, and other financial products. So, with this in your mind, how can you improve the credit score?

The first step is necessary but not utilized anywhere near enough: Get a copy of your credit report and check that all information held against your name is accurate. Incorrect information can be disputed, then amended or removed as necessary. Even a seemingly minor point such as a previous wrong address can have a serious negative impact on your score.

Make sure you pay your credit bills on time, every month. Although this is becoming increasingly tough when money is tight, missing payments will severely hinder your credit rating. Paying off a loan or credit card in full will give your credit score a big boost, but even making the minimum monthly repayment will give you a small increase.

Also use your credit cards sparingly, and pay using your debit card, check book or cash wherever possible. While some credit card activity is good, putting everything on your card can make it appear that you are dependent on it. By keeping records of your spending, you can keep on top of this. This also includes paying off your debt rather than moving it around from card to card.

Another tip to improve the credit score is to be consistent. Staying at the same address, keeping the same job and staying with the same bank will all earn you points for reliability. Always chopping and changing can give credit providers’ the impression that you are unreliable and a risk to them. Making regular applications for new cards and accounts will also have a negative impact.

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