So you are looking to buy your first home or maybe even finance a new car and you are worried about your credit. Although raising your credit score is never a quick and easy task, there are various immediate actions that you can implement today in order to start the process towards raising your credit score.
Your credit score is important because it provides a clear picture to lenders about your ability to repay what you owe. The benefits that come with a high credit score are usually monetary but they can also give you power to negotiate as well as a sense of security. Although there are a variety of credit scores available to lenders, the most important of them all is your FICO score that is provided by one of the three national credit bureaus, Experian, Equifax, or Transunion. If you haven’t already reviewed you score from one of these three providers and you are looking to take out a line of credit in the next 6 months, it is in your best interest to do so.
Correct blatant mistakes.
This is one of the main reasons you should obtain a copy of your credit report every year. Correcting an error on your credit report can take up to three months or longer. Catching and correcting errors though can have a huge impact on your score that will definitely reflect on your interest rates when it comes time to borrow. It is good practice to keep detailed records of your credit lines and payments in the case that you have to dispute something on your credit report. The more supporting evidence you have, the easier it will be to plead your case.
Pay your bills on time
If you don’t already practice the responsible habit of paying your bills on time, now you have an extremely good reason to. One late payment can tarnish years of timely payments on your credit score. If you have a long and timely history with your credit card company it never hurts to request from them that the information be removed, especially if it was truly an error or oversight. This is always a good practice, and it’s especially critical that you make prompt payments close to the time you need a loan.
Reduce your credit card balances
One of the most important factors of your FICO score relates to how much you owe on your credit cards relative to your limit. A good rule of thumb is to keep the balance below 25%.
Eliminating Balances on Multiple Cards
It is always tempting to sign up for cards at stores that you frequently shop at in order to take advantage of savings or rewards. Credit card churning can save you alot of money but it is best to limit it to two cards. This practice is only beneficial of course if you continue to make timely payments and make sure to stay under the 25% of your ceiling.
Pay off debt rather than moving it around.
This rule relates to the third point in that translating debt to another card is only increasing you closer to the ceiling of that line of credit, therefore lowering your score. It is a better practice to focus on one line of credit and pay it off. After you’ve eliminated the balance do not cancel the card as your credit score reflects this negatively. Having a clear history of debt being repaid is something that lenders like to see.
If you haven’t already received your free copy of your credit score, that is the first step. After doing so, you will know just how much work you have laid out in front of you. It is never too late to start building your credit score and with a little work and persistence you will notice results that will pay off for you when it comes times to take out credit.