Having a strong credit score is key to moving ahead in life: You need a good score to own a home, qualify for loans and purchase new vehicles. If you know that some of these things are on the horizon, it's time to start improving your score so you'll be ready when the time comes to make major investments. Knowing your score, managing credit cards responsibly and being proactive about credit report errors are crucial to having the best score possible.
Know Your Score
The first step to boosting your credit score is knowing where you stand. All consumers are entitled to a free credit report once a year. The website annualcreditreport.com is the sole authorized website where you can request a free copy of your report. Have your name, birth date, address and Social Security Number ready when you visit the site. Requesting your own credit report will not lower your credit score.
Limit Your Number of Cards
If you’re new to the credit card world, avoid opening many new cards at once. While this can increase your available credit, opening multiple cards at once is a red flag for lenders as it makes you appear as if you need lots of credit immediately. Start with one card and add another once you’ve learned the ropes and proven yourself a responsible credit card user.
Use Your Credit Cards
In order to boost your credit, you have to use your credit cards, but avoid creating large monthly balances as this can hurt your credit score. Financial expert Liz Pulliam Weston of MSN Money recommends keeping your monthly charges to 30 percent or less of your card’s limit. Don’t stop using old credit cards. Make sure to keep older credit cards open. Use them every few months and pay off the balance in full each month. Closing old cards can actually lower your score.
Pay Off Balances
If you have cards with balances close to their limits, pay these down first. If you can get your balances below 30 percent of your credit limit, it will seriously improve your credit score. Always pay your bills on time: Even paying your electric bill a week late can show up as a negative entry on your credit report. If you run into financial difficulties and cannot pay your credit card bills on time, contact your lender immediately to work out a reduced rate. Remember that if you have an account sent to collections, it will remain on your credit report for seven years, even if you pay it off.
Check for Credit Report Errors
Request your credit report at least once a year and check it for errors. If you find errors, write a letter to the credit reporting company detailing any problems that you find on the report. Credit reporting companies are required by law to investigate any errors. Enclose copies of documents, such as bank statements or other proof of payment, that will support your case. Keep a copy of your dispute letter. If the dispute is not resolved but you feel that you’re in the right, request that a copy of your letter be included in your file and in future reports.
- George Doyle/Stockbyte/Getty Images
- Understanding the Basics of Credit Repair
- Can You Throw Out an Unactivated Credit Card?
- How to Avoid Getting Your Credit Card Canceled
- What Affects Your Credit Score Negatively?
- Steps to Take After Your Credit Card Is Stolen
- Ways to Fix Your Credit Score
- How to Raise Your Credit Score from 600 to 700
- How to Refuse a Credit Card Upgrade