Ways to Improve Your Credit Score

Unless you have perfect credit, you’ve probably wondered what steps you can take to improve your credit score. Here are a few ways to do just that:

Reduce the balance on your current accounts

One of the best ways to improve your credit score is to reduce the balance on your revolving credit accounts. Revolving accounts are those which can be borrowed against repeatedly for an indefinite period of time — for example, bank loans, retail, or credit card accounts. When you pay down your balances, your credit score increases because the lower your account balances, the higher your credit score. A good rule of thumb is to keep your balances at not more than 50 percent of your credit line to ensure a high credit rating. Bear in mind that it can take up to two months for the new account balances to show on your credit report and positively impact your score, so if you want to raise your score before your apply for a new loan, mortgage, or credit card, allow enough time for your higher score to be recorded.

Make your credit card payments on time

Another way you can improve your credit score is to stay current on all of your accounts by making your payments on time. Mailing your payments at the last minute can easily cause your payments to be late since it can take up to ten days for your credit card company to process the payment. Late payments which show on your credit report automatically lower your credit score. Also, making a single payment late may result in a permanent increase to your annual interest rate, not only with the company which recorded the late payment, but with your other credit companies as well.

Don’t apply for new accounts

There’s one way to improve your credit score which requires absolutely no effort on your part: don’t apply for new bank, retailer, or credit card accounts. When you apply for new credit, the companies you apply to review your credit report. These reviews show as inquiries on your credit report. The more inquiries you have, the lower your credit score will be. The reason for this is that lenders view multiple inquiries as an attempt by less than desirable customers to obtain credit.

If you follow these simple steps, over time you’ll see your credit score increase. All it takes is a little effort and discipline and you’ll be on the road to sterling credit.