1. Pay off your debt
One of the fastest and most efficient ways to improve your credit score is to pay off the high balances on your credit card. This could improve your credit score by 60 to 70 points. Credit bureaus use this information to predict how much of a credit risk you are by how you handle credit card debt. They pay particular attention to credit card debt more than any other kind of debt, such as student loans, because with installment loans, like mortgage payments, there is a predetermined amount you pay each month. With credit cards, you’re in control of what debts you have.
2. Maintain low balances
Make sure you never charge more than 50% of your credit limit to any credit card on any given month. The credit bureaus look at the amount you pay on your credit card regardless if you pay your bills off every month. Not following this principle could hurt your credit score by as much as 60 or 70 points. What do you do if you have to go beyond the 50% threshold? Try to plan the expenses around the payoff date or spread the charges across several different credit cards to keep the balances down.
3. Keep those older cards
Since the credit bureaus look at your overall credit history, specifically how long you’ve managed your credit, make sure you keep your older credit cards. Instead, you should focus on keeping the older credit cards and eliminating newer ones and/or refraining from opening new lines of credit (unless absolutely necessary) regardless of the type of card as this will most certainly lower your score by at least a few points. From a credit worthiness standpoint, three or four accounts is all you need and is sufficient for building excellent credit.
And stay away from those store credit cards. They usually have low limits and make your credit score look really bad.
4. Correct Mistakes
Make sure you review your credit reports from time to time as it’s not uncommon for errors to be reported.
If you don’t already subscribe to a credit monitoring service, go sign up for one right now!! Equifax Score Watch it’s only $12/month. Every time, there’s a change to any of your credit reports, you get an email within 24 hours.
Identity theft is not fun and the average time and money spent trying to restore one’s credit from a stolen identity is about 10 months and $1,500 respectively.
Alternatively, you can order a free credit report (you are entitled one per year) from any of the three credit bureaus (Equifax, Experian and TransUnion). If you want to track your credit more frequently, you can purchase your credit report directly from the credit bureaus online, my mail, or in some cases by phone for about $10. Also, If you have recently been denied credit you are eligible for a free copy of your credit report.
Lastly, you might want to consider credit repair. If you can boost your credit score from 580 to 720 you suddenly go from having 28% APR credit cards to getting 0% APR credit card offers! When buying a home, getting a prime rate versus a sub-prime rate can save you hundreds of thousands of dollars over the lifetime of the loan. That’s definitely worth a few hundred dollars.
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