Having a good credit score not only affects your loan interest rates but it can also mean the difference in getting that job you’ve applied for or moving into your perfect apartment.
In general, FICO credit scores, which range from 300-850, are what most lenders and organizations use to determine your creditworthiness. The higher your score, the better it is. There are countless stories of the headaches caused by a downward credit spiral from not being approved for loans, lines of credit and more.
While you can’t make a bad credit score disappear overnight, the Consumer Federation of America has outlined the following steps that will help you better manage your credit and gradually improve your score.
Review your credit history: Obtain a copy of your credit report and review it for inaccuracies. See a balance that was paid off but it is still reported as outstanding at a collection agency or an erroneous late payment? Every negative mark impacts your overall score. Filing a dispute to correct inaccuracies is time well spent.
Keep paid off accounts open: With 15% of your credit score determined by the length of your credit history, it is important to keep your older accounts open. Even after you have paid an account in full, letting that account to stay open and active will improve your score.
Pay off your balance: Lots of small balances on different cards can hurt your score. A better strategy, if possible, would be to stick to using and carrying balances on one or two cards instead.
Pay bills on time: This is one of the most important and often overlooked opportunities that can make a big impact on your score. Paying just 30 days late will lower your credit score. If you go 60 or 90 days past due, your score will plummet.
Pay down your balance: If your cards are all maxed out, even if you always pay on time, it will significantly lower your credit score. To lenders, you look like you have no spare money to pay on another loan, and they aren’t likely to grant you any additional credit.