How to Improve Your Credit Score

While it's easier to maintain a strong credit history and higher score than it is to improve an already poor credit score, there are a few tactics that people can use in order to help improve their credit score.  Higher credit scores result in better opportunities for obtaining financing at the best rates- desirable for making major life purchases like homes and automobiles. 

Know What You're Dealing With

Before you work at improving your credit score, it's a good idea to know what you're working with.  It does not affect your score in any way to obtain a copy of your own credit report.  This is the first step to improving your score: Knowing what your score is!

Not only will you have the physical number that lenders see when they check your credit, but you'll also be provided with a detailed list of all of your creditors- past and present, your payment history and other information such as your place of employment, addresses and marital status. 

Verify that all of the information in your credit report is correct, because often there are mistakes made to your credit report.  Mistakes can affect your score!  This is the reason that credit reports initially became available to the general public- individuals were being denied credit based on information in the reports that they were not able to verify whether or not it was the correct information.  If you do find errors, follow the steps provided by the credit reporting agency for having those mistakes corrected.  This alone can often improve your credit score!

Specific Techniques for Improving Credit Scores

Once you've made sure your credit history reflects only accurate information, you can begin to concentrate on further improving your credit score.  There are no overnight fixes, unfortunately, but with time and financial discipline you can make a difference and improve your future financial situation.

First, and most important, pay your bills on time.  Your credit score is a reflection of your pattern for making payments over time; and the emphasis is on more recent payment transactions.  When you have delinguent payments, or have current items sent into collections, your credit score is going to be majorly impacted in a negative way.  If you have these problems in the past- you can't change it or have it removed from your report, but you can make a positive impact on your credit score by keeping your current accounts up to date.

Secondly, stop applying for new credit!  Often, people apply for a store credit card because the cashier promises to save you a percentage of that day's purchase as an incentive- but keep in mind a store credit card will often have high fees and interest rates that will cost you way more than your savings on the current purchase.  Plus, opening new accounts gives you a higher "available credit" and lowers your credit score.

It is better to pay off debt than move it around.  Have you ever heard of the credit game, or maybe you invented it yourself?!  Many people have found they can pay off a credit card with a new credit card.  Unfortunately, this is not a good long term strategy for a higher credit score.  When you have too many credit cards, you end up with too many of the same type of credit types on your report, and the result is a lower credit score for having a poor credit mix.  If you close credit cards that are unused, the result may be a higher credit score for the short term, but having few accounts open with the same amount of money owed will eventually result in a lower credit score.  To effectively play the credit game, you need to make regular payments on time to your existing credit cards in order to pay them off- and avoid using one credit card to pay off an older balance. 

Don't Max Out Credit Cards & Revolving Credit

As tempting as it may be to use a single credit card until you've reached the maximum amount you're allowed to  borrow, having high outstanding debt, or carrying balances that are near the maximum limits on your revolving accounts will result in lower credit scores.  If you already have a credit card or two that has reached the maximum limit, focus on paying them down so that you have lower balances.  A good rule of thumb is to keep your balances below 50% of the total amount you are allowed to borrow.