How To How To Improve Your Credit Score

Pay monthly credit card bills on time and as agreed. Sounds simple, but this is the most important things you can do to keep your score high and one of the best ways to build good credit or rehabilitate your credit profile.

Since your payment history alone makes up the 35% of your credit score,it's important to pay your bills on time, even if money is tight. "On time" means the payment gets to the company by the day the bill is due. Late payments that are 30 days or more past due can be reported by creditors and lenders to the credit bureaus and in turn have a negative effect on your overall credit score. Remember late payments can stay on your credit reports for as long as 7 years.

Delinquent payments and collections have a major negative impact on a FICO score. Do whatever is necessary to make sure your bills are paid on time. If you have previously missed payments, get current and stay current.

Here are some ideas for avoiding late payments

Mark your calendar and mail your bills a few days before they're due.
Consider setting up automatic monthly payments and pay your bills automatically out of your checking account every month. Electric, gas, telephone, and insurance companies often encourage their customers to pay their bills this way. If you use automatic payments, make sure you keep track of them in your checkbook.
If you plan on going on vacation, make a plan for keeping your bills up to date. For example, schedule automatic payments from your bank account, ask a friend to pick up your mail and send you your bills so you can pay them while you are gone. You can also call your creditors before you leave town and arrange to pay your bills ahead of time.

Taking these steps will improve your credit over time. In general, creditors look for a two-year history of paying bills consistently on time to help establish good credit.

At least try and maintain a low credit card balance. The second largest factor impacting your credit score is how much you owe. This accounts for 30% of your score. The more you owe, the lower your score will be. Don't max out your credit cards or get too close to your credit limit. Using too much of your available credit, you can hurt your credit score.

Credit scores consider how close you are to being "maxed out" on credit cards. Experts advise using no more than 30 percent of your available credit — some even say you should use less than 10 percent.

The rule of thumb credit score formula is that your debt to credit ratio which should not exceed 60% of your total available credit.

Here are some suggestions to help you pay off your Credit Cards

A high outstanding balance will affect your credit score. If paying off your credit cards every month is a difficult to do, then cut up the card so you can't use it. Or put the card away until you pay it off your balance.

Remind yourself that credit cards are loans. Before you pull out your credit card, ask yourself, Would I really take out a loan to buy this?

Charge less than the maximum amount available on your credit card. Even if you make the payments on time, creditors may think that you are in too much debt.

Only apply for the credit you need and avoid signing up for new credit cards you do not need. This includes getting a new card so you can transfer balances, or opening a new store card account so you can get a discount. Avoid applying for credit cards just for fun, or to get a "free gift" or a discount on a purchase. Every time you apply for a credit card, line of credit, or other loans, it appears as an inquiry on your credit report. If you apply often, creditors may be concerned that you are using too much credit. Even if you do not open the charge account, your application may raise a flag that you may be having cash-flow problems. You need to know that the amount of your unused credit is an important factor in calculating your score. Your credit score may go down if you apply for or open a lot of new accounts within a short time. Only apply for credit that you need.

Keep in Mind:
People who do not open new accounts frequently and have longer credit histories generally pose less risk to lenders.

The fact that you have available credit, doesn't mean you have to use it. Racking up big balances can hurt your credit scores whether you pay your bills in full each month or not. Just remember, what is typically reported to the credit bureaus, and then calculated into your credit score are the balances reported on your last statements.

To help increase your credit score, limit your charges to 30% or less of a credit card's limit. 10% is even better. This will take a little bit of discipline on your end, but if you find yourself going over 50% of your limit, try making a payment before the statement closing date to reduce the balance that's reported to the credit bureaus. Another option will be to use other cards to ease the load and stay under the 30% of your credit card's limit.

One of the best ways to improve your credit score is to have your good behavior reported every single month to the credit bureaus. When you apply for a credit card, line of credit, or other loans, always make sure your creditor is posting your credit line on your credit report. If you notice accounts that you have are not showing up on your credit report, you should notify the creditor right away and request the account to be reported to the credit bureau. If they give you a reason why they can't, then it's time to take your business elsewhere. Showing less than your available credit will result in a lower credit score.

The older your credit history, the better, so do not close an old positive accounts. Length of credit history is another important credit score factor in determining your credit score. It can be of benefit to keep older accounts that are in good standing with $0 balance open even though it increases the number of open accounts. With an older account, even if you don’t use a credit card, your account will still get reported to the credit bureaus as being in good standing every month.

Just know that if you stop using your oldest cards, the bank or store may decide to close the accounts or stop updating them to the credit bureaus. The old accounts may still appear on your credit report, but they won't be given as much weight in the credit scoring formula as your active accounts. One of the things you can do to make this card relevant is to use it once in a while or charge a recurring bill on it and paying off the balance in full every month.

Studies show that as many as 80% of consumer credit files contain errors and inaccuracies. What are the chances you might be 1 of those 80. This is a good reason to check for errors and inaccuracies on your credit report, especially ones that are negatively impacting your credit scores.

Errors or inaccuracies in this section of your Credit Report can lead to higher interest rates on loans and credit cards or denials for new credit.

Personal information
Accounts belonging to another person with the same or similar name to you
Incorrect accounts resulting from identity theft

Reporting of account status
Closed accounts reported as open
Accounts that are incorrectly reported as late or delinquent
Incorrect date of last payment, date opened, or date of first delinquency
Same debt listed more than once

Balance errors
Accounts with incorrect current balance
Accounts with incorrect credit limit

Data management errors
Reinsertion of incorrect information after it was corrected
Accounts that appear multiple times with different creditors listed