Improving Your Credit Score

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 Improving Your Credit Score

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Improving Your Credit Score

Credit scores usually fall between 300-850 points. Generally, the lower your score, the more risky investment you may appear to lenders or other creditors. Scores are often used as a "predictor" of how likely you are to pay back a loan or default, and can even be used to determine what level of card you may be eligible for and what type of interest rate you may qualify for.

What should you do if you obtain your credit score and it is lower than you expected? Here are some steps you can take to improve your score. Don't panic¡ªit CAN be done!



  • First, check to make sure your report is accurate, and correct any inconsistencies as soon as possible. Mistakes do happen, so be sure to review your report closely to be sure nothing is out of order! If you do find an error, contact the credit bureaus immediately to alert them to the problem, and ask them to include a written statement on your credit report letting others know you are sorting out the issue.


  • Your credit file may not reflect all your credit accounts. Most national department store and all-purpose bank credit card accounts are included in your file, but not all. Some local retailers, credit unions, and travel, entertainment, and gasoline card companies are among those that usually aren't included.

    If you've been told that you were denied credit because of an "insufficient credit file" or "no credit file" and you have accounts with creditors that don't appear in your credit file, ask the consumer reporting companies to add this information to future reports. Although they are not required to do so, many consumer reporting companies will add verifiable accounts for a fee. However, if these creditors do not generally report to the consumer reporting company, the added items will not be updated in your file.



  • If you made late payments on your loans or credit cards due to illness or other emergencies, make sure you contact the credit bureaus and ask them to indicate the reasons for your delinquencies on your report. They will include a short explanation for you so others will be informed of your situation.


  • Try to limit the total amount of inquiries on your credit report over a twelve month period. Each time you apply for a new credit card, charge card or other loan, the lender accesses your report and the inquiry is reflected, which can negatively impact your score. Keep these inquiries to a minimum when trying to repair your score by only applying for new accounts when you really need them.


  • If you owe money on your loans or credit cards that you know you cannot pay, contact your lender(s) immediately to see if you can devise a payment schedule. Showing a good-faith effort often goes a long way in these situations.


  • Try not to "max out" your credit cards, and if you do have credit cards at or near the maximum limit, see if you can transfer some of the balance to another card.

    Ideally, your credit card balances should be at or below 30% of your credit limit. That means you¡¯ll only have a $300 balance on a credit card with a $1,000 limit. First, focus on bringing over-the-limit balances below your credit limit to save expensive fees. Then, work on bringing all your credit card balances down to a more credit-friendly level.



  • Determine Financial Goals. Establish a short- and long-term financial goal, such as buying a new car or house or saving for a vacation. Seeing a light at the end of the financial tunnel may make it easier to stick to your budget.


  • Set-up a Monthly Budget. Get a handle on your expenses by writing them down. Track your monthly expenses like rent or mortgage, utilities, food, travel and other debt payments. Determine how much you can afford to put in your savings account. Then put aside some money for discretionary items, such as entertainment, eating out and clothing, and stick to it! Visit here for help in creating a budget.


  • Sometimes, applying for a small loan and paying it off quickly (and on time each month) can help rebuild your score.


  • Get Your Credit Score. If you're planning a major purchase, get a hold of your FICO credit score by visiting www.myFICO.com.


  • Most important, pay all of your credit card bills or loan payments on time, every month. Even if you are only 30 days late with a payment, it will sometimes be reflected in your credit report, so be sure to be vigilant about paying your bills.


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