A credit score is like your health – most people don’t think about how to increase their credit score it until it becomes a problem. Just as the current state of your health mirrors the health habits you have followed over a longer period, so does your credit score reflects your credit history. Below, you’ll find the different ways that I utilized to increase my credit score:
1. Get a copy of your credit report, review the information in it, and if you find any errors, have them corrected. You can have inaccurate information removed by either contacting the credit agency or contacting the creditor. The Fair Credit Reporting Act calls for all credit-reporting bodies to investigate any disputed factors at no cost to the consumer. The law requires that the creditor verifies the entry within 30 days or the information must be deleted from your file. If your credit report gets corrected, you will receive a free copy of the revised report.
2. Pay your bills on time. This is critical. Paying on time means mailing your check, at least, five days prior to the due date or scheduling online payment at least two days before. Do not wait till the last date or try even to backdate your credit checks when mailing them a bit late, as this definitely will not work.
3. Work to increase your debt-to-credit ratio. This can be done by repaying as much as you can of what you owe on the loans you have, by increasing the credit limit on the credit cards that you have while keeping the balances low, and applying for a new credit or debit card with a high limit, but keeping the balance low or zero. Just don’t go around applying for too many cards at once, and don’t be tempted to spend more money just because you now have more credit available!
4. Protect your credit history. If you have some credit cards or accounts that you want to close, think about it first. Canceling a card will wipe out part of your history and increase your debt-to-limit ratio, both of which will reduce your score. If you want to cancel several cards, start with the newest one first, and then in a month or two see what it does to your score.
If you don’t have any history you will not have a FICO score, because the score is merely a calculation based on data collected by the credit bureaus. Believe it or not, having no score can be as bad or even worse than having a low score. You may find that it is tough to get a loan, or you may have to pay a lot higher interest rate because the lender does not have a clue whether you are a credit risk or not.
5. Create the right credit mix. Lenders like to see a good mix of credit cards, retail cards, and installment loans, such as car loans or home mortgages. Someone with a single secured credit card is considered riskier than someone who has a combination of installment and revolving loans.
I had to follow these tips to improve the poor credit score I had. Now that I got my credit rating up, I was able to fix my credit rating, and I will never make the same mistakes with credit rates again.