How to Improve Your Credit

If you aren’t getting approved for credit cards or loans, or aren’t getting favorable rates for financing, you might need to make some improvements to your credit score. Doing so takes a little time, but we have some tips that can help you along the way.

Pay Your Bills on Time

The single biggest influence on your credit score is whether you’ve made your loan payments and done so on time. Your payment history is 35% of your score. It’s the biggest slice of the pie.

In fact, according to FICO, 96% of people with excellent credit (scores over 800) pay their bills on time.

Keep in mind that this number only reflects payments as they relate to your credit report. If you consistently pay your utility bills, for example, that won’t influence your score. Your best defense: Set up automatic payments for the minimum amounts to make sure you’re never tardy.

Fix Your Late Payments

You may feel inclined to close accounts with a lot of missed payments, hoping those missed payments will just disappear, but sadly, they won’t. Your best bet here is to get yourself back on the right track — set up payment due date alerts with all your credit cards and loans and get organized.

Ask your credit card issuer or lender if they can forgive that late payment. Maybe you were out of the country on vacation or the check got lost in the mail and you had no idea the bill existed. Credit card companies in particular are pretty forgiving if you have a long track record of making on-time payments.

Leave Old Debt on Your Report

Some people erroneously believe that old debt on their credit report is bad and try to erroneously correct it. For example, when a home or car paid off, some folks try to get it removed from their credit report. Negative items are bad for your credit score, and most of them will disappear from your report after seven years. However, trying to get old accounts off your credit report just because they’re paid is generally not a good idea. Good debt — debt that you’ve handled well and paid as agreed — is good for your credit. The longer your history of good debt is, the better it is for your score.

One of the ways to improve your credit score: Leave old debt and good accounts on as long as possible. This is also a good reason not to close old accounts where you’ve had a solid repayment record.

Correct Credit Report Errors

A simple credit report error could wreak havoc on an otherwise respectable score. It’s estimated that 20% of credit reports contain errors, and if you spot one on yours, fixing it could give your score an immediate boost. According to the Federal Trade Commission, 20% of consumers who dispute credit report errors see their scores rise as a result, so it pays to review your credit report and make sure it’s completely accurate.

The Three Credit Bureaus:

• Experian: (888) 397-3742
• Equifax: (800) 685-1111
• TransUnion: (800) 916-8800