How to Improve your Credit Score

A good credit history is an increasingly important asset in modern life and there are many situations in which you will be judged on your score. So now you ask "How can I fix my credit?" Although there can be a temptation to hide away from your credit history, you cannot start to fix something you don’t know about! It is important to check credit score when ever you can. You may even be surprised that some areas of your credit history do not need any attention at all. In addition, your credit score can contain inaccurate information and it’s up to you to dispute it with a view to putting it right. However, if you do have bad credit there are a number of things that you can do to increase credit score. It isn’t something that can be changed overnight from a credit repair service, but with time and determination you should be able make some significant improvements. In order to understand how to improve your credit score, here is how it is calculated:

Payment History

The largest part of your credit score (35%) relates to your payment history, which concerns whether you made payments on time, whether you missed any and if so, how many payments are overdue. Late payments are reported as such once they are thirty days or more late – so if a payment is a few days late this will not show up.

However, if there are delinquent accounts on your credit history, it’s very important to fix these first as it will have a considerable effect on your score. Although the last thing you might want to do is call your creditors, you may be surprised at the help they offer you if you do contact them, they may even offer a credit card debt settlement. This could also help you to make a plan to get out of debt.

Credit Card Debt

The second largest part of your credit score considers the amount of revolving debt you have (i.e. credit cards, department store cards etc.) This takes into account two factors: firstly the amount of credit available to you, or your credit limit, and secondly the outstanding balance on that account. Ideally you should not borrow more than 50% of your total balance from any single lender.

Surprisingly, your credit score will be better if you owe four lenders a small amount on four cards than have one card that is near to or at its limit. If you have bad credit as a result of your credit card debt, you should stop using your cards to make purchases – at least until you’ve begun to improve your score.

Keep Your Accounts Open

Another important factor in determining your credit score is the length of time you have held accounts open with lenders. The age of your accounts comprises 15% of your total score. You will be likely to achieve a better score if you keep the account open but maintain a balance of zero rather than close the account. People who score highly in this section usually have low balances on several accounts that have been open for over seven years.

Applying For More Credit

Any application for more credit lowers your credit score. Fortunately, if you make a number of inquiries during a short period of time (e.g. if you’re comparing deals on the market for automobiles or trying to get the best mortgage deal) this will count as one inquiry. It is always important to bear this in mind if you are considering making a large purchase. However, while you are trying to improve your credit score you are better off not making any applications for credit at all.

Installment vs. Revolving Debt

Finally, 10% of your score is based on the amount of revolving debt you have in comparison to the amount of installment debt. This means that if you have no mortgage or vehicle loan (installment debt) but a lot of credit cards (revolving debt) you will have a lower score than if you have a mortgage, a vehicle loan and less credit card debt.

Are you having trouble paying your bills? Discuss your options with a bankruptcy lawyer today.

Think Bankruptcy Might Be for You?