Good credit is a big deal. Your credit score can determine whether you're approved for a mortgage and determine the interest rates you're charged for borrowing money. A credit score can even affect your chances of landing a good job. If your FICO credit score (the most common scoring system) is low, take heart. If you improve your credit score by 100 points, it can make a huge difference. For example, 620 is considered borderline – anything less is “subprime.” But 720 is considered good. A credit score of 720 means you can expect a mortgage application to be approved and that you’ll get decent interest rates.
Start to improve your credit score by checking your credit history. A credit score is actually a summary of the information on the credit history maintained by each of the major credit reporting agencies: TransUnion, Equifax and Experian. If you find mistakes, you can file a dispute and have the information corrected. If it’s a serious mistake, this alone might improve your credit score by 100 points. You can obtain a free copy of your credit report from each credit reporting agency once a year through the Federal Trade Commission’s authorized provider, Annual Credit Reports.
Refrain from applying for new credit accounts or closing old ones. Everyone occasionally needs to open or close accounts. However, frequent account changes will hurt your score. When you are trying to improve your credit score, don't make such changes if you can avoid it. The benefit of this tactic is that it works quickly; account changes stay on your credit history only a short time – less than a year.
Pay all monthly bills on or before the due date. This is the single most important factor that goes into your credit score. Your payment record counts for more than one-third of the total score, according to HSH Associates. Above all, don’t let a payment run past 30 days. That will really hurt your credit score.
Reduce your credit card dept. This has to do with something called your "credit utilization ratio." In everyday terms, if you “max out” your credit cards, it looks bad. Having a credit card with a lot of available credit looks good because it shows you manage your finances well enough to avoid charging up to your limit. Don’t close out a credit card, even if you pay it off. According to Bankrate, closing accounts eliminates available credit, and hurts your credit utilization ratio and therefore your credit score.
Develop a long-term strategy to reduce your overall debt. Lowering the total amount of debt you owe usually takes time, but it will raise your credit score.
- The Federal Trade Commission authorizes only one provider of free credit reports: Annual Credit Reports. Even the major credit reporting agencies don’t provide free credit reports. On their websites, they simply refer you to Annual Credit Reports.
Based in Atlanta, Georgia, W D Adkins has been writing professionally since 2008. He writes about business, personal finance and careers. Adkins holds master's degrees in history and sociology from Georgia State University. He became a member of the Society of Professional Journalists in 2009.