How to Improve Your Credit Score

How to Improve Your Credit Score


Your credit report and credit score can help you to assess your creditworthiness. There are many reasons that may cause a poor credit score to be assessed by the major credit bureaus - too many debts or outstanding bills, bankruptcy, low credit to debt ratio, not paying taxes, missing loan payments and negative reports to collection agencies from a retailers.
The foremost step to improve your credit score is to analyze the sources that have the most impact on your credit score. Firstly, your credit history plays a major role in determining your score. You need to have fewer outstanding bills, taxes, debts, liens and delinquencies to improve your score. Though the past cannot be changed, paying off debts and taxes on time going forward can definitely start moving your score in the right upward direction.
Paying off present loan balances completely can also help your credit score. Stretching payments by only paying the minimum allowable amount can signal a weakened financial position to those determining your score. In the eyes of creditors you will be less trusted with any extension of added debt. If you cannot pay your balances off completely make it a goal to pay your balances off to 50% of your credit limit. Maintaining a balance above 50% of your credit limit can start to adversely affect your credit score.
Surprisingly enough, refusing to take credit for a long period of time can negatively impact your credit score as well. This is because lenders will not have any access to past activity to assess you as a credit risk. This is why it may be a good idea to maintain open accounts instead of closing them, when your debt is paid. Demonstrating that you had credit available but use it judiciously sends a message of being responsible with the credit extended to you.
Check for errors in your score by asking for credit reports from all three major credit bureaus. Taking this step will make you familiar with your past credit history and you may find errors in verifying the information presented in all three credit reports.
For instance, should you find a delinquent payment you are sure you have paid you can correct the error by sending a letter with proof that you made the payment on time. Following through with a correction like this can typically raise your score in about 30 days. By law credit agencies are obligated to correct errors in your credit report that are brought to their attention.
The steps outlined above can be applied to most situations to boost credit scores, however there are professional advisors and credit counselors to help if your credit matters are more complex. These professionals can be sought to form a more personalized strategy to see you through your specific credit issues.
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