Tips for Improving Your Credit Scores

A credit score is a number based on a complex formula that takes in a number of financial factors to help lenders know how likely you are to make reliable credit payments. Credit scores can affect whether you’re able to get approved for automobile loans, credit cards, mortgages and other types of credit. Potential employers may also do a credit check to determine your financial responsibility and landlords may only approve your apartment application if your credit is in good standing. Maintaining a good credit score can not only make it much easier to get credit, but it also lowers interest rates on credited items drastically.

There are various factors that affect your credit score. These may include whether you pay your bills on time, if you’ve ever been contacted by a collection agency, if you’ve ever declared bankruptcy, the amount of money you owe, the length of your credit history and the types of credit you have. Most individuals who have a longer established credit, as well as a more extensive variety of credit will resume a higher credit score. The three major credit bureaus that collect and report consumer credit data are TransUnion, Equifax and Experian. In addition to collecting and maintaining reliable credit reporting information, the three credit bureaus distribute the credit data to the appropriate institutions.

One of the most important tips for lowering your credit score is to pay your bills on time and do not miss payments. Payment history makes up 35 percent of your score, making on-time payments a great way to rebuild credit. Missing even one payment can knock off between 50 and 100 points from your credit score. Since your credit score is a reflection of your payment history, it’s important to review it periodically to check for accuracy before applying for a loan. Correcting a mistake on your credit report can take at least 30 days or longer. Maintain a ratio between 20 and 50 percent between your credit limit and credit card. The lower your balances, the better your score will become. Even if you must pay the minimum payment amount, you will slowly increase the gap and increase your credit score.

It’s also best to avoid those tempting “in-store” credit cards. The interest rates tend to be much higher then regular bank credit cards and simply opening a new credit account can cause a 10 point drop in your credit score. Following these basic tips can help to lower your credit score.