Improve Credit Score
You probably know already how your credit score is calculated. Things about you like payment history, available credit, and existing debts are all factored in. But since you missed on a few bills lately, does this mean that there is nothing you can do to repair the damage?
Of course not! Your knowledge into the once secret process of credit scoring should make it easier for you now to take steps to improve credit score. But first thing’s first: Get a free copy of your credit report from any of the three major credit bureaus — Equifax, Experian, and TransUnion. Now, do a little housekeeping by scouring it for any mistakes. If you find any, report it to the credit bureau and have it corrected. Once that’s done, you are now ready to take the next step.
Below are the steps to help you improve credit score:
Pay Your Bills on Time
This is going to be your mantra from now on. If you’re wondering why, the reason is that payment history is the single most important factor in determining your credit score. In fact, it makes up 35% of the total.
You see, lenders use your credit score to determine future credit performance. Naturally, your past behavior around making payments is indicative of how you are going to perform this time around.
Note, however, that recent history carries more weight than what happened five years ago. Therefore, if you get into the habit of making on-time payments right now, it would have a very powerful impact on your credit standing and help you improve credit score. This is true even if you’ve been a delinquent payer before.
If you have trouble keeping up with your bills because there are just too many or you are just too busy, it might help if you put as many of them as possible on automatic to improve credit score. Another way to ease the burden is to pay the bills online. Many lenders now offer online bill-payment systems, making it easy for you to make payments on time.
Reduce Your Debt
The more room there is between the amount of debt reported on your credit cards and your total credit limits, the better. It is universal law that lenders prefer borrowers who have lesser debts than credits.
Now, the problem with credit card debts is that they don’t distinguish between those who carry a balance in their account and those who don’t. Worse, a credit card issuer takes a look at your account once every month or so and reports the outstanding balance on that day to the credit bureaus. If it so happens that you haven’t yet made your payment on that day but pay a few days later, the payment you just made won’t reflect on the snapshot recorded by the credit bureaus. To prevent this from happening and improve credit score in the process, reduce the charges you make on your credit cards.
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