If you’ve applied for a loan recently or are looking to buy a house, you know how important your credit score can be. Even just a few points can make a difference in the interest rate you pay. Over the 30 year term of a home mortgage, that can translate to some serious money. And, if you are looking for a loan, it may make the difference between a good and bad credit loan.
Your credit score is made up of several elements, including whether you pay your bills on time, how much credit you have, the number of years you’ve had credit and how much of your available credit you use. How can you improve your credit score? The short answer is to always pay your bills on time and to use credit wisely. However, in addition to these broad suggestions, there are some small, specific things you can do to raise your score.
Examine Your Credit Report
US consumers are entitled to view their credit report from all three reporting bureaus for free once every 12 months…and you should. Reporting mistakes can happen and they can cost you. To request your annual reports, visit Annual Credit Report or call 877 322-8228. If you find any errors, follow the procedures on the report to have them corrected. There are other companies that offer credit reports, but they often come with a fee. If you want to know your credit score, you likely will have to pay to get it.
Limit Your Credit Use
Having all of your credit cards maxed out will hurt your credit score. If possible, pay off your credit balance each month. If that’s not possible, aim to use no more than 60 percent of your available credit.
Limit Your Credit Applications
Applying for credit too often can also hurt your score. Even though you get weekly (daily?) offers in the mail, be careful in the ones you select. However, all credit applications for the same thing submitted within a two week period count as one application, even for a bad credit loan. This allows you to shop for the best interest rates for home mortgages, refinances and auto loans. If you are looking for a bad credit loan, make sure that you find the best place to start before you apply.
Be Careful with the Small Stuff
Ignoring a library fine, a book club bill or an old parking ticket can all affect your credit report. Be as responsible with the little bills as you are with your mortgage and car payments.
Don’t Close those Accounts
If you’re trying to repair your credit, it may be tempting to close all of your credit accounts and just pay cash. However, as counter-intuitive as that may seems, such an action can adversely affect your credit score. Part of your score comes from how much credit is available to you. Close those accounts and that number drops considerably.
Did We Mention to Pay Your Bill on Time?
If you only do one thing to help improve your credit, it should be to make sure to pay your bills before the due date, even utilities and small bills. Your bill-paying history makes up more than half of your credit score. Mess that up and there’s no magic fix that will instantly get your score to rebound. However, if you do need a bad credit loan, there are options out there.
Don’t just leave your credit score to chance. Take charge of your credit report and your credit score. The time and effort you take can save you thousands of dollars in interest, and can mean the difference between a good and bad credit loan.