7 Ways to Raise Your Credit Score
Your Credit Score has a huge effect on your life and personal finances. Your credit score not only determines your ability to borrow money at all, but also directly affects the costs of borrowing money.
Under today’s scoring system, an individual with a high credit score can get a loan for cars, houses, vacations, credit cards, etc. at a much lower rate of interest (ie: lower monthly payments) than a person with a lower score. To save real money every month…take our advise and boost your credit score with the following 7 Tips.
- Less Isn’t More: When it comes to your credit score. Lenders like to see different types of credit in your history file including credit cards, car loans and personal lines of credit. Lenders are looking to see how you handle different types of debt repayment.
- Don’t Close Accounts: Keep your old credit accounts open, even if you have paid the loan in full. The more available, unused credit you have, the better your score will be. Your older, established accounts are also more valuable to your credit score and raise your score more than newer ones.
- Raise Your Credit Limits: While it helps your score to have a lot of available, unused credit, opening a new credit account will drop your score in the short term. A good strategy is to ask your credit company to increase your current credit limit on a regular basis. A high line of available credit is valuable, whether you need the additional credit or not.
- Your Net Worth, Income and Savings Don’t Matter: The only thing that matters to your credit score is what lines of credit you have open and how you use them. A cash paying millionaire will likely have a lower credit score than a maid or gardner who use credit.
- Small Balances and Lots of Cards are Better: Since you credit score is sensitive to how much “available” credit you have, having small balances on a number of credit cards is better than having a big balance on one card only. As a rule of thumb, you should only use 30% of the available credit on any one card. 70% of your credit limit should be available and unused.
- Don’t Shop Around or Apply for Credit: As ironic as this sounds, your credit score drops each time you have an inquiry to your credit report. Lenders see inquiries as borrowing activity, whether you accept a loan or not. (Note: Pass up the come on’s from department stores who offer you 10% off your purchase for applying for a store credit card. A 10% discount is generally worth far less than the points lost due to the inquiry.)
- Watch the Calendar: Pay attention to due dates and minimum payment requirements. While “pay on time” sounds basic, it can be difficult for many of us to do.