Learning how to improve your credit score is often much easier than most people think. If you have a poor or average credit score you really can make leaps and bounds with your credit rating if you focus your actions correctly. Unfortunately, far too many people look for the quick-fix solution rather than the long term good effects that come with learning to control your finances responsibly.
So let’s answer that now age-old financial question we all have asked – “just how can I improve my credit score?”
There simply is no quick credit fix solution for serious problems, regardless of what the late-night infomercials say. It’s also not possible to remove any listings on your credit report that are true, although you certainly can have any listings added in error taken off. Numerous companies provide a free credit score or credit report.
How Your Credit Score is Calculated
Before you can learn how to improve your credit score, you should take a moment to understand what factors could potentially damage it and how important each factor is to your overall score on the credit score scale.
35% – Repayment History
30% – Outstanding Balances
15% – Length of Credit History
10% – Types of Credit Used
10% – New Credit Applications
As shown above, the major factor in calculating your credit score is your repayment history. This aspect accounts for a full 35% of your score. If you have a habit of falling behind on your payments or making your payments past the due date, chances are your credit has been negatively affected.
Work on catching up any late payments and pay off any overdue amounts as quickly as you can. Find a way to get your budget in order so that you’re able to make your payments on time each month. This can have a big impact on improving your credit score.
A full 30% of your total credit score is based upon how much you owe on your outstanding balances as they compare to your available credit limits. If you have several credit cards and they’re all near their limits, then this will reduce your credit score.
If you’re serious about finding out how to improve your credit score, then debt reduction will be a big factor. Work on ways to begin paying down your outstanding balances. With each extra payment you make on your credit card, your balance will be further away from the available limit.
Don’t be tempted to charge more purchases to your credit cards just because you’ve paid a little bit off the balances. Continue to reduce your debt levels and you’ll see several benefits arising.
Aside from knowing you’re in less debt, you should also notice your minimum monthly payment amount reduces as you pay off what you owe. You’ll also notice that your credit score will begin to rise accordingly as you fix bad credit issues.
Length of Credit History
While time is the only thing that can improve this side of your credit score, there are things you can do to help. Each time you apply for new credit, it’s listed on your credit. You can improve this side of your score by not applying for any new credit until you’ve regained control of your existing situation.
When a person has applied for several credit cards or loans in a short period of time, this can reduce your score, as it could indicate that you’re not able to manage your financial obligations responsibly.
If you’d like a free credit report to check out your credit history, click here.
Types of Credit
A big part of how to improve your credit score is about knowing what can affect your score and how to avoid it. While 10% of your score is based on the types of credit you use, don’t be tempted to go out and apply for new loans or credit cards just to have more accounts or to try and create a balanced mixed of credit. This won’t work.
As long as you manage the credit facilities you already have wisely, this aspect of your credit score will be relatively easy to improve.
A person who submits several new credit applications in a short period of time can end up with a lower credit score. Instead of applying for more credit, work on ways to handle the credit you already have more responsibly.
Reduce your debt levels and you’ll find there’s always plenty of available limit on your credit card when you need it for emergencies. You’ll also find that your repayments will decrease a little as you begin to pay down the outstanding debts.
The best part of how to increase your credit score is that you’ll be learning to take control of your financial situation again so you’re less likely to get into the same trouble again in future. Soon enough you’ll be able to find an easy to get credit card and back on your way to an excellent credit score – or even a close to perfect credit score. – which is really true credit power and freedom.