Raise Your Credit Score
Is it important to raise your credit score? It may be. Lenders
each have their own "break points" between scores that
get you one interest rate or another. If you have a score of
688, and the lender drops the mortgage refinance rate by .5% at 690, those
two points can cost you an extra $20,000 in interest on a $170,000
loan (over 30 years at 6.5% instead of 6%).
Is $20,000 important to you? Probably, so what can you do
about it?
Ways to Raise Your Credit Score
Fortunately there are ways to raise your credit score. Some
take more time than others to have an impact, but if you start
working on it now, you can boost that score before long.
1. Check your credit reports for errors. If there are any
errors that may be hurting your score, contact the credit reporting
agency that issued the report and challenge the error. They are
obligated to investigate and correct any mistakes within thirty
days. If the creditor doesn't respond to their inquiries, they
have to automatically remove the item in question, although you
may have to remind them about this part of the law.
2. Pay all bills on time. You may even want to borrow money
to get those bills paid on time, if you have to. Paying on time
is the thing that has the biggest positive impact on your credit
score. Paying off old delinquencies won't immediately raise your
credit score, because these will still show as being paid late,
but start paying on time now, and with time, these old late payments
are deemed less important.
3. Have the right number of cards. At least two cards is best,
and having more than five or six can actually lower your score.
4. Pay off your balances every month. This is just good for
your future, as a way to keep you out of excessive debt. It can
save you a lot in interest charges too. It also demonstrates
your ability to manage your debt, and so increases your credit
score.
5. Manage your balances. It is best for your credit score
if the balance on a given card is less than 50% of the limit
on that card. Manage your use of the cards to keep the balances
below this amount. For example, if you have three cards with
limits of $2,000, $3,000 and $2,500, it is better to have a $600
balance on each than $1800 on one. Aiming to keep those balances below 30% is even better.
6. Keep the right cards. If you close accounts or cancel cards,
do it right. Old accounts are better than new ones for your credit
score, so keep those old ones open, even if the balance is zero.
Also, because it is best to keep balances below 50% of the card
limits, you may want to consider canceling your lower-limit cards
if you regularly keep balances on your cards.
7. Don't apply for too many loans and cards. Too many inquiries
on your credit reports lowers your score. Don't apply for a lot
of cards in a given year.
8. Be careful whom you borrow from. Car dealers and others
help you finance your purchases through finance companies, and
this can lower your score. It is better to borrow the money from
a bank or credit union.
8. Be careful whom you borrow from. Furniture stores and others
help you finance your purchases through finance companies, and
this can lower your score. It is better to borrow the money from
a bank or credit union.
You may have noticed that this is almost a list of things
that your lower credit score. It really is, and you should keep
that in mind. Just pay things bills on time and don't do things
that lower your score - that's the best way to raise your credit
score.
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