How to Increase Your Credit Score and Fix Bad Credit
, on May 27, 2009
Regardless of your financial situation, your credit score is an important aspect of your finances. This is especially true if you’re planning to borrow money for any reason. With a better credit score, you could get better interest rates and terms on your mortgage, car loan, and other type of loans. As such, it’s a good idea to do what you can to raise your credit score.
If you don’t know your score yet, here’s how you can get your credit score for free. It only takes a few minutes to sign up and find out.
How Your Credit Score Is Determined
Before you can improve your credit score, you should have a basic understanding of how your credit score is calculated. In general, there are 5 key factors that influence your score.
Graphic from myFICO’s About FICO scores page
|Payment History. Do you repay your debt on time? Late payments, collections, and bankruptcy are also included here.
|Credit Utilization, or Debt to Credit Ratio. How much money you owe compared to your credit line?
|Length of your credit history. How long is your track record? How old is your first credit card?
|Credit Mix. Do you have different types of loan — e.g., mortgage, car loan, business loan, revolving credit, etc.
|Credit Inquiries. Do you have a lot of applications for credit recently?
Improving Your Credit Score
Now that you know how your credit score is determined, it’s easier to put together some guidelines to help you improve your credit score.
- Pay on time and avoid late payments. The easiest way is to pay as soon as you get the statement or schedule your payment in advance. If you still make your payments by mail, read this article on how to avoid late payments by using proper envelope.
- Avoid collections. Make sure you can make your payments before adding to your debt.
- Avoid bankruptcy. Bankruptcy stays on your credit report for 7 to 10 years.
Length of credit history
- There’s no sense in getting into debt just to improve your credit mix, so I’d just let this one be.
- Understand the difference between soft pull and hard pull. Avoid activities that create a hard pull because these impact your score negatively.
It’s important for you to note that it takes time for your credit score to improve, so please be patient.
Do you know another credit score improvement tip? Please share yours here.
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About the AuthorPinyo
is the owner of Moolanomy Personal Finance
and an entrepreneur with over 20 years of business experience. He has a strong appreciation for business management, investing, and wealth building. He has written for many online publications, including American Express and U.S. News.
Credit Score Ratings Chart
|700 - 750
|640 - 700
|580 - 640
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