Getting in over your head financially can turn your life into a bit of a nightmare. If you need to improve your credit score, here is a list of tips to know just how to go about doing that. When it comes to your money, truly knowledge is power.
It might be helpful to be aware of just what types of transactions affect your credit and how they are categorized:
- Kind of Credit Being Used=10%
- New Credit =10%
- Span of Credit History =15%
- Full Amount Owed =30%
- Payment History =35%
The next thing that will help you assess what you need to do is to know what your personal line of credit is. You can do this by checking in with the credit bureaus. There are three of them, Experian, TransUnion and Equifax. Thanks to the Fair and Accurate Credit Transactions Act, you are allowed one annual credit report – free of charge -from each of these three agencies. Just a side note to this: while all credit bureaus allow for credit checks for expected purchases or transitions like buying a new car or getting a new job, checking your credit score too frequently can have an adverse effect on the score. So know what it is, get your 3 free reports each year but don’t be obsessive about checking your score like some well-aired commercials seem to suggest.
One additional perk of checking your own credit report is that you can report any errors it may contain. If you notice anything amiss, get it fixed right away. Getting false reports off your ratings could help to improve your rating.
Here are some additional tips:
1. Don’t cancel idle credit cards as a quick-fix strategy to boost your score. Credit bureaus consider how long you’ve had an account, and the longer it has been open the better.
2. Pay off your credit cards just as quickly as possible. Paying them down is good, but getting that balance to 0 will help move your credit score up.
3. Don’t get yourself into financial trouble by maxing out any of your credit cards. The best case scenario is to have each card or credit line at only 30% of its maximum value or credit limit.
4. Don’t skip payments. This is a no-brainer, but the point here is to emphasize doing whatever you can to make sure you don’t miss payments as this hurts you immeasurably and will haunt your credit score for a long time.
5. Pay off your debts. Rather than moving your debt around, work to pay it off.
6. If you are in a situation where you cannot be approved for credit cards or need to work to build up your credit, consider getting a secured credit card. This is a credit card attached to a specified account that you open with a a small amount of money (usually $300). This prepaid card still works like a credit card in that it is reported the same way when making purchases. Using a card like this can help to improve your score by establishing a good report of having your bills paid.
7. Use only 1 or 2 of your top cards and leave the rest of your accounts open but do not use them all. Just let the accounts age and they will help you out.
Following these hints will help you establish credit if you do not already have any, or repair a poor credit score so that it does not continue to follow you around and plague your life. Be wise in your spending habits, learn to curb your spending and consistently pay back what you owe and you will be well on your way to financial freedom. Being in control of your spending rather than having it control you is worth working for – just ask anyone who has been through it.
This is a guest article written by Margo Smith
Margo Smith graduated with a B.S. degree from BYU. She draws from her experiences as a modern day children’s governess, her time spent in New England, her years in the corporate world and an author’s perspective on life when compiling articles about a variety of subjects from organic food to online colleges to women’s issues.