Improve Credit Score Slowly
Take Steps to Improve Credit Score
Looking for a fast way to improve credit score? Good luck. It’s a slow, detailed, step-by-step process. But even though it may take some effort on your part, improving your credit score is definitely worth your time and effort. If you stay focused and follow a few basic steps to improve credit score, you will see a big difference in how much money you pay for goods and services.
For starters you get charged less in interest rates on credit cards, mortgage loans, auto loans and student loans when you have a high credit score. Insurance companies lower the premiums of those with high credit scores. Landlords usually charge less in rent to those with high credit scores. Even utility companies will charge you less for service if you have a good credit score. If you are looking for a way to save some money on the things you buy and use, a place to start is with your credit score. You should know where to get your credit score, what it means and what you can do to change it.
Step #1 – Do You Know Your Credit Score?
A credit score of 850 is excellent, 650 is fair and 300 is poor. Do you know your 3 digit credit score? If not, you should. Everyone should know their credit score. And there is no reason why you shouldn’t. You can obtain your credit score very easily through one of the 3 credit bureaus. Those credit bureaus are TransUnion, Experian and Equifax. Each of those companies have websites and toll-free phone numbers. Unless you are a victim of identity theft, you can get one free credit report every year from each of the 3 credit bureaus. If you have been an identity theft victim you can order more than one credit report per year.
You can get a free credit report from the 3 credit bureaus. A credit report will show your credit history, but not your credit score. You will have to pay a small fee for the credit score. But paying that small fee to know what your credit score is may be worth it. You cannot improve credit score without first know what that score is, right?
Step #1 Action Plan:
Do not delay, order your free credit report today and learn your credit score. Check for discrepancies and errors.
Step #2 – What Does The Score Mean?
Once you learn your score, so what? What does it mean? It means that you are rated and assigned a number. The higher the number, the better for you. The 3 digit number (your credit score) that the credit bureaus assign to you is based on their analysis of your financial habits. What does that mean? That means that the credit bureaus monitor your spending habits, bill paying habits and credit card balances to determine how financially reliable you are. If you have good habits you get a high score. Bad habits, obviously gets you a low score.
When a credit card company extends you credit or a mortgage company loans you money they are trusting you with that money. They eventually want their money back. So before they give you their money they want to know how reliable you will be at paying it back. The way these creditors determine how reliable you are is by your history. And your history is wrapped up in a 3 digit number called your credit score. So creditors use that 3 digit credit score number to determine if you are a good or bad risk. If you have a low credit score they feel that you will be a bad risk so they’d better charge you more just in case you do not repay them.
Creditors protect themselves. They cushion themselves from non-pays, late-pays, delinquent pays, collection accounts and bankruptcies by charging those customers who have those issues more for their credit services.
Step #2 Action Plan:
Do whatever it takes to raise your credit score.
Step #3 – Raise Your Score: Watch Your Payments
Your payment history makes up the largest chunk of your credit score; 35% to be exact. Which means that every payment you make effects your credit score. Your score gets damaged even if you pay late by just a few days, or just have one non-pay. Creditors don’t care, they label you as a risk and ding your credit score. Therefore, the simple act of paying your bills on time, every time, can improve your credit score by the greatest margin.
Step #3 Action Plan:
Pay your bills on time, every time. Even if it is only the minimum payment, pay on time. If you have a hard time even making the minimum payment on time, cut back on your spending until you can get current and can get in the habit of paying on time, every time.
Step #4 – Raise Your Score: What Do You Owe
The second largest impact on your score is based on how much owe compared to the amount of credit you have available to you. This is called your utilization ratio and it makes up 30% of your overall score. For example if your credit card limits are $4000 and your credit card balances are $2000 then you are utilizing 50% of your credit. In a perfect world, your utilization ratio should be less than 25%. It is always a bad financial move to max out your credit card limits, then you get labeled as financially irresponsible. Think about it, if your credit card limits are $4000 and your credit card balances are $4000, your utilization ratio is 100%. That signals to creditors that you could be a big risk.
Step #4 Action Plan:
Keep your credit balances low, well below the credit card limits.
Watch Your Back
Believe it or not, credit scores are becoming more and more important. Employers are even starting to use credit scores to weed-out potential candidates for job openings. So it is becoming more and more important that you keep tabs on and monitor your own credit score. Since a credit score could make the difference between getting job or not and paying more money for everything you buy or use, watch your back.
Are bad credit scores always your fault, well maybe and maybe not. Sometimes discrepancies or errors pop up due to no fault of your own. Any entity that you enter into a financial transaction with can create a discrepancy or error on your credit report which then goes into your credit score. These entities can include credit reporting bureaus, credit card companies, mortgage companies, loan companies, insurance companies, landlords and employers. All the data processor has to do is transpose one number or enter one wrong transaction and your credit score is damaged. Get in the habit of checking your credit report at least once a year (for free) for discrepancies and errors. Remember, take care of your own finances, no one cares more about your finances than you do.