Improve Your Credit Score with 5 Easy Tips
Posted on 2015-10-21 09:00:41
Credit scores are designed to quickly and objectively predict your creditworthiness. Most credit scoring models consider five key factors. Focus on these 5 tips to improve your credit score.
Lenders want to know how you pay your bills. Your payment history usually carries the most weight with any credit score model. A trend of late payments will not go unnoticed. Delinquent accounts and bankruptcies can cause your credit score to drop significantly.
Tip #1: Pay your bills on time, every time.
Creditors are interested in how much credit you have already committed to, especially in relation to your credit limits. If you are near or over your credit limits, prospective lenders may be hesitant to issue more credit. Even if you pay your bills in full each month, your credit score may factor in a large closing balance reported to the credit bureaus.
Tip #2: Keep credit card balances below 20% of your credit limit. If you are using credit cards to build rewards, considering paying down the balance before the statement closing date.
Take a Look at Your Credit Score
Length of Credit History
A longer credit history is viewed favorably by lenders. It is rarely a good idea to close old accounts, even if you aren’t using them. It could shorten the credit history used to calculate your credit score. However, idle accounts will not help your credit score as much as using an account and making timely payments.
Don’t close old credit card accounts without good reason.
Most credit score models look at “hard inquiries” on your report – those that result from a credit application you initiate. Unless they are excessive, inquiries usually have a minimal impact on your credit score. But go on a shopping spree opening new accounts, and the impact could be greater. New accounts will also lower the average age of all of your accounts, and that could negatively affect your credit score.
Don’t apply for credit that you don’t need.
Types of Credit Used
Having a proven track record with a variety of types of credit (mortgage, car loan, credit cards, etc.) is viewed positively by creditors. However, this factor does not weigh as heavily on your credit score as your payment history or the amounts you owe.
It is seldom wise to apply for credit you don’t need just for the variety.
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