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5 Tips to improve your credit score

[Dec 29, 2008.]


Improve your credit score by making payments on time

35% of your credit score comes from making your monthly payments on time.  Make a list of each credit card or installment loan payment due date and put those dates on a calendar to remind you each month.  The bill collectors do not care if your monthly statement does not arrive in the mail, or even if you have an emergency trip to the hospital.  Those bills need to be paid on time no matter what.  Realizing that and taking responsibility for that will have the greatest positive effect on your score.

Improve your credit score by lowering your outstanding balances

The credit scoring agencies are looking for you to carry no more than 30% of your available balance from month to month.  Outstanding balance ratios count for 30% of your credit score calculations. That means that if you have a $2,000 credit limit, your balance should be no more than $600.   In addition to keeping track of your payment due dates, as suggested above, also keep track of your credit limits.  On each of your cards, calculate what 30% of that credit limit would be - try not to carry more than that 30% from month to month.  That can mean that consolidating everything onto one card could hurt your score instead of help.

Improve your credit score by not card swapping

15% of your credit score has to do with the length of time you have with each account.  So if you are one of the people who respond to every special offer you get in the mail, and you are transferring balances onto new cards and closing the cards with longer histories, you could be hurting your score.  The credit scoring agencies would like to see long relationships with each of your accounts. 

Improve your credit score by maintaining a mix of types of accounts

10% of your credit score comes from the mix of types of debt.  It is better to have a mortgage, car payment, and a credit card, than to have all of your debt on a credit card.  Think about a mix of types of debt instruments.

Improve your credit score by limiting the number of inquiries

Most people already know about this category which impacts the score by about 10%.  Each time a company checks your credit, your score can drop between 2 to 25 points.  The inquiries begin to drop off of the credit report after six months.  Keep in mind that many of the credit card companies will periodically inquire into your credit situation to determine the interest rate and credit limit they will offer.  So even if you don't apply for any new debt, there will likely be inquiries going on anyway.  Carefully read each of the company's policies to see how often they will check your credit.


About Author:

Renee Morgan has been a loan officer for over eighteen years. She is also a freelance writer and guest expert for radio and TV.

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