Five Ways to Improve Your Credit Score

Taking action to improve your credit score will have a major impact on your life.

As you realize, the FICO (Fair Isaac Organization) credit score is among the most important issues in getting loans of any sort – be it private loan, home loan, company loan or credit cards. Even working with companies that extend credit like utilities will improve as you improve your credit score.

Even if you get a loan with less than good credit, the interest rates are higher.  Credit scores range from 300 to 850. A credit score of 850 is virtually by no means unheard of.

The credit scores of individuals are maintained by three major credit bureaus:  Experian, TransUnion and Equifax. Businesses you deal with report your transactions with these bureaus. These credit transaction records become part of your credit report.

The information in your credit report is used to compute your credit score.

What Credit Scores Mean

Credit score of 700 or higher signifies excellent credit.

Credit score of 680 to 699 is deemed excellent credit.

Credit score of 620 to 679 is considered typical or OK credit.

Credit score of 619 or under is considered poor credit.

Typically, a person with a credit score of below 619 might or might not get a loan. But even if a loan is approved, the terms will probably be objectionable. Creditors who offer loans for people will low scores generally make plenty of cash from the borrower by charging high rates of interest, various fees like loan origination fees, closing fees and numerous hidden fees.

Many credit card providers monitor individual credit scores and whenever a card holder’s score drops below a specific level they will lower the credit limit drastically. While a credit score may not truly indicate the individual’s credit worthiness and capability to repay a loan, it’s one of many indicators about the individual’s trustworthiness and financial responsibility. An individual who pays debts on time is deemed to become a much more responsible individual.

Let’s Improve Your Credit Score

The very first thing you should do is obtain a credit report. The federal government mandates that you be able to review your credit reports for free from the three major credit reporting agencies each year. You can obtain your credit reports at:

https://www.annualcreditreport.com

This is the only legitimate site that will offer your credit history each year for free with out requiring you to provide your credit card information.  You should know that you will need to pay if you also want your credit score from any of the credit reporting bureaus. But, your actual credit report is free.

Credit scores can be increased fairly easily unless there’s a bankruptcy in your background. For removal of bankruptcy from credit file you may have to speak to a lawyer.

Right here are five activities you can take right now to improve your credit score:

1. Look at the negative items on your credit report to see if any have been there beyond the time limit for such items. Typically, negative items on your credit report will stay there for 5 – 7 years. If there are items that are more than two years old, then you can request removal of those items by stating that they are too old. Request removal of all negative items like late payment of credit cards, collection items, settlements, non-payment of bills and so forth that are more than two years old by writing to Experian, TransUnion and Equifax. Removing any negative items will immediately improve your credit score.

2. If you missed making a payment because you were traveling or in the hospital, write to the credit company reporting the late or missed payment with an explanation.  Many credit card companies or other businesses will oblige unless they believe you are using this as an excuse for delaying your payments.

If they refuse to remove the negative item you have another option. You can write an explanation of the late or missed payment and have it added to your credit report. Send the explanation to the credit reporting agencies that have recorded the negative items. You do not have to be a professional to write these letters. They just need to know what explanation is and they don’t care about the format. Write in a business-like, objective manner without emotion.

3. If there is a collection item that continues to be falsely entered or if the amount is too little (beneath $100), then once more you can write some explanation to the three credit reporting bureaus requesting a removal. This will initiate an inquiry and the credit company that made the negative report must respond to verify the item. If the quantities are too small or do not pertain to you, then the probability of the credit company responding is small and the likelihood of removing this from your credit file is better. As a result, you will improve your credit score.

4. Do not allow the balance of any particular credit card to exceed half your credit limit. Having balances of more than half the credit limit is viewed by credit card companies as bad and this will decrease the credit scores. Keeping a credit balance less than half of the credit limit will significantly improve your credit score.

5. Set up automated payments of minimum amounts with all the credit card companies so should you forget, then at lease the minimum payment will be made. This consistency in your payments can tremendously increase your score. Later you can pay off as much of the balance as you are able to. Having no late payments for a year is very good and will improve your credit score.

If there is a bankruptcy in your past, then it might be tough to remove it even though you could attempt to by writing to the three bureaus. Alternatively, if your economic scenario has improved considerably, then you can talk to a credit attorney to get rid of bankruptcy.

Changes to credit scores will take a couple of months to take affect. So following your actions you’ll have to wait for a short time to see the effect. But, know that taking action as soon as possible will improve your credit score.

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