Tips to Improve Your Credit

Your credit rating is one of the most important parts of your financial health. Getting a home loan, car loan or credit card can be difficult unless you have good credit. A good score can also improve your chances of building wealth, because it ensures that you will receive the lowest possible interest rates. If your score is less than ideal, here are some ways that you can improve it.

The most obvious thing you can do to improve your credit is to make sure that you always pay your bills on time. The largest single determinant of your credit score is how you have paid your creditors in the past. If you historically have not paid your bills on time, paying your bills on time going forward is the first step to improving your score. While late payments will remain on your credit score for 7 years, your credit score will increase after successfully making payment on time for a full year.

Next, you will want to pay off as much of your revolving credit as possible. Next to timeliness of payments, your level of outstanding credit card balances is the largest determinant of your credit score. To maximize your credit score, your outstanding credit card balances should be less than 20% of your credit card limits. As an example, if you have $20,000 in credit card limits, you should never carry more than $4,000 in revolving debt. If you pay down your credit card balances so they are less than 20% of your limit, your credit score will improve immediately. If you do not have the cash on hand to pay down your credit cards, you may want to consider calling your creditor and seeing if they would be willing to raise your credit limit. This would result in a lower overall credit utilization ratio.

The last of several tips to raise your credit score is to pay off charged off accounts through a pay for delete. If a creditor has ever charged off your account because you refused to pay back your debt, they most likely have written off your account. A charge off has an adverse impact on your credit score and will remain in your file for seven years from the date of last activity. If you contact the creditor, they may be willing to delete the account from your credit file in exchange for payment in full.


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