How To Improve Your Credit Score

Your credit score is a little three-digit number that can have a big effect on your finances. If you are considering making a large purchase such as a house or car or if you are trying to get a loan, your credit score is very important. Even if your lender, after viewing your credit score, grants you these things, your credit score will still determine the interest rate you will pay.

If your credit score is not up to par, do not fret. It will take some time, but you can improve your credit score. If you are wondering how to improve your credit score, here are some steps you may take.

First of all, you must make sure all the information on your credit report is correct (hint:  use annualcreditreport.com, it’s free). Statistics show that up to eighty percent of credit reports contain incorrect information, and you can correct such errors. Look in your credit report for information on how to clean up these errors.

Next, make sure to pay off any debts you might have as soon as possible. Although this does not directly affect your credit score, as records of debts will remain in your report for seven years, your recent behavior does matter to lenders. After you have paid your debts, continue to pay any bills on time so that you do not accumulate any new debts.

Make sure you keep old credit lines open. Do not cancel them! You can improve your credit score by using these old accounts for smaller purchases, purchases that you know you will be able to pay on time. Also, closing old accounts with unpaid debts can negatively affect your credit score. This changes one of the main factors in your creditworthiness, your utilization ratio. This number is calculated by dividing your total debt by your total available credit.

Another way to positively affect your utilization ratio is to spread purchases out using each of your cards. It is better to keep several cards at a lower percent, like 20 to 30, than using a high percent of your credit on one card. If you have already used one account more than others, you can transfer the balance to your other accounts to lower the percentage of credit that you used.

A bad credit score can certainly be frustrating. However, with some time and patience, you can improve your credit score. Take these steps, and your score may even improve in as little as three months. Hope is not lost if you have a bad credit score.