If you’re not aware of this, having a bad credit score (500 or less) can have a very negative effect on your life. If you can get credit, it will have a very high interest rate. You will probably have to pay more for your auto insurance. If you can get a mortgage, it will have a high interest rate. And a low score could even prevent you from renting an apartment. So what can you do to improve your credit score? Here are six things that can help get the job done.
Pay your statements on time
Thirty-five percent of your credit score is based on how you’ve handled credit. If you haven’t been paying your bills on time start doing so – every time.
Pay all your balances down
Thirty percent of your score is based on the amount of credit you’ve used (your balances) vs. the total amount of credit you have available. If you have many cards with high balances, this will have a very bad impact on your credit score. So, you should pay down your debt until your total balances are at, or less than, 25% to 30% of your total limits. As an example of this, if you have a card with a $1000 limit and only a $250 balance, this will have a positive and quick impact on your credit score.
Get credit now
Despite what you may have been told, it’s not good to have no credit because the amount of time you’ve had credit determines 15% of your score. Lenders believe that the past foretells the future. If you’ve borrowed money and repaid your debts regularly over a 12-month period, you will be seen as a better risk than a person who has no credit record at all.
Don’t go crazy with credit cards
Don’t forget that 10% of your credit score is based on the number of times you’ve applied for credit – even of you never used the credit. The more loans or credit cards you’ve applied for, the more credit inquiries will turn up on your credit report. If you have a lot of credit inquiries, lenders will think you may be struggling financially or have a lot of debt. So, the fewer applications you make, the better it is for your credit score.
Have different types of credit
The different types of credit accounts you have determine 10% of your credit score. This includes credit cards, retail accounts, installment loans, mortgage loans and any other type of credit possible. If you have a variety of types of credit, this shows that you are able to responsibly handle different kinds of accounts.
Monitor your credit reports
The Federal Trade Commission recently issued a report said, among other things, that one in five Americans have errors in their credit reports that could be negatively affecting their scores. You need to monitor your reports from all three credit-reporting agencies because the information in one may not be the same as the information in another. In the event you find an error in one of your reports, you can dispute it and have it corrected or removed. Of course, you will need documentation to prove your case. Be sure to keep copies of all your paperwork as related to credit cards, mortgages, personal loans, etc.