Depending on your credit situation you can increase credit score by building a credit history, maintaining a good credit history and repairing your bad credit rating. If it looks like a common sense to you, it actually is.
What you’re actually doing is “managing creditworthiness.” Here you want to control your FICO score — the industry standard of credit scoring — because it determines your credit ability.
Lenders use your FICO credit score to find your interest rate and the amount of a loan. The higher your credit score the better the loan terms you’ll get. So, taking care of your score, and keeping your credit clean will obviously save you money in the long run.
Three Simple Steps To Increase Credit Score
Preserving your FICO score, and improving it, are not difficult, but it may take time. The following are some tips to maintain and increase credit score, based on three credit situations.
1. Building a Credit History
If you have no credit history, your FICO score is likely to be low. The easiest way to raise your score is acquire a loan, and pay it off on time. Because installment loans are weighted more heavily than credit cards, you will improve your credit score faster if you buy goods with an installment loan.
Another way to build a credit history is to use $1000 and open a 6 month CD account at your bank. You can then get an installment loan for $1000, using that CD as collateral. With the loan, open another 6 month CD account at another financial institution. As same as at your first bank, take a $1000 loan at the second institution. Do this one more time.
Now, with your 3 loans make the minimum payment for 6 months. In the last month, cash out your CDs and pay the loans off. This way has built your credit history, and you didn’t need a long-term debt to meet it.
2. Maintaining a Good Credit History
Once you’ve paid your bills on time and don’t have high credit card debt, you can increase credit score by keeping your old accounts open. One factor that influences your credit score is your credit capacity, which is the amount of credit available versus amount of credit used. Closing old accounts increases your used credit capacity that is translated into a lower score.
Next, improving your monthly payments of your credit cards. Since your credit card company reports your credit information monthly to credit bureaus, there is a chance that you carry a balance every month, especially if they report it before you pay off your card. You may find your FICO score improves if you pay off your credit card at a different time of the month.
3. Repairing Bad Credit History
If you have a bad credit history, there are things you can do to improve your score. Because the most significant part of your score is your payment history, you can fix your credit score by paying your bills on time. Additionally, you can increase credit score by paying down your credit cards because how you use credit is the next important part of your FICO score.
The last thing to look for is errors in your credit report. Get a copy of your credit report from all three credit bureaus — Equifax, Experian, and TransUnion — and look at all the entries. If you find any errors, take steps to have the inaccuracies removed. Here calling your creditors may also help removing negative information.
So, your FICO score is an important benchmark of your financial life. If you use the above steps to increase credit score you’ll get lots of saving potentials from lower interest charges. However, remember to consult to a financial advisor before you make any drastic change. He or she will help you to discover why you have a low score and then will recommend you on how to improve credit score.