Easy Ways to Improve Your Credit Score

By Sarah Borroum

Americans are obsessed with credit scores. The higher the number, the better your interest rates and chances of getting any credit in the first place.

Even a few minor mistakes in the past can affect your rating – and your chances of credit approval. These tips will help you improve your credit score. Note that significant improvements will take time – whereas you’ll only need a couple of months to add just a few points to your score. Start working on your score now, even if you have a year or two before you try to buy a new house or car.

Obtain your credit report once a year and promptly correct any mistakes. Make your request for corrections in writing so that you have records of any action you’ve taken.

Guard your identity as much as possible. Fighting fraudulent items on your credit report can be time-consuming and almost impossible.

Selectively fill out applications for credit. Instead of trying for every credit-card application that shows up in the mail, select one or two that you’d really like to have. Being denied credit on a regular basis – i.e. filling out several applications a month – can drop your credit score.

Spread out your credit-card balance over several cards that you already have. If each of your credit-card balances total less than about 30 percent of your maximum limit, you’ll look much better to future creditors.

Sometimes you’ll need to close a credit-card account. Keep the oldest one: the length of your credit history matters to most lenders. They’d rather see an old card with a low balance than a newer card with a higher balance.

Have one or more bills in your own name and make all payments on time, in full. Using your Mom’s name to get a telephone might help you at first, but she’s the one building credit. Transfer the account into your name and pay the bills on time.

Tip: these bills won’t help your credit score unless the company uses credit-reporting agencies. Ask a company representative if you aren’t sure about this.

If you must miss a payment or send only part of what you owe, contact the company for help before the due date. Letting your creditors know that you have a problem before they have to send nasty letters makes most of them more willing to work with you.

Even if you’re behind on some bills, start paying on time. This will help reduce the impact of past indiscretions. When you need credit, the last few months’ worth of payments will count more than what happened before that.

If you’re in a serious financial jam, seek out credit counseling. This is better than filing for bankruptcy, which can take a couple of hundred points off your credit score. Yes, you read that correctly: you can really lose that many points by declaring bankruptcy. If there’s any way that you can avoid this final move, do so.

As time passes and you continue making solid financial decisions, your score should improve. You’ll enjoy more offers of credit, better interest rates and other benefits.

However: if your credit was so-so – or even bad – because of past indiscretions, take this as a well-learned lesson. Sound money management will help you maintain your good score and save you from future finance-related headaches.

© Doityourself.com 2006