Your credit score is an important factor that determines the limit you can reach financially. The higher your score is, the more likely you will be able to qualify for credit cards and loans with favorable interest rates and terms. If your credit history and score are not where you want them to be, there are things you can do to see an improvement. Even though improving your credit score will take time and patience, following some of the tips below can get you started.

  1. Borrow Money Responsibly

Borrowing money responsibly is the key to establishing a positive credit history. Only obtain loans and apply for new credit accounts as needed. Opening too many accounts just to get a better mix of credit will not likely improve your score. Instead, consider using small loans to build credit over time. Unnecessary credit hurts your score by adding too many hard inquiries on your credit reports and can tempt you to accumulate more debt than you need.

  1. Don’t Close Unused Accounts

As long as an open account or credit card is not costing you money, it is a smart strategy to keep them open. When you close accounts you are not using, your credit utilization ratio will increase. Owing the same amount in debt while having fewer accounts open can lead to your score dropping.

  1. Pay Bills On Time

When you apply for credit or loans, lenders that pull your credit report and credit score will be very interested in how reliable you are with paying your bills. More often than not, past performance is a good indicator of future performance when it comes to paying bills on time. When you pay your bills when they’re due, it will positively influence your credit score. Making late payments or settling accounts for less money than they were originally for can decrease your credit score.

  1. Catch Up On Late Payments

Most people go through tough times financially at least once in their life. If you do end up missing payments on some of your accounts, work towards bringing those accounts current as quickly as possible. Even though late and missed payments can appear as negative information within your credit report for up to seven years, the impact they have on your credit score will decline in time. Older late payments will have much less effect on your credit score than recent late payments.

  1. Monitor Credit Utilization Ratio

Your credit utilization is another aspect of your credit that will affect your score. It is calculated by adding all of your account balances and dividing that number by your total credit limits combined. Most lenders prefer when consumers have credit utilization ratios under 30%. It lets them know that you are good at managing your credit. You can improve this ratio by paying off debts to keep your balances low and becoming an authorized user for someone else’s accounts.

  1. Dispute Inaccuracies on Your Reports

It is important to regularly check for inaccuracies on your credit reports. If you find a mistake, dispute the information to have it corrected as soon as possible. Incorrect information on your credit can negatively affect your score.

Rebuilding or improving your credit score can take time. Unfortunately, there are no shortcuts to take. The time it will take to raise your score depends on the factors affecting your score in the first place. Negative elements such as collections or delinquencies can stay on your reports for seven to ten years.

By Richard