Credit Score Check: 3 Ways You Can Improve Your Credit Score by Doing These 3 Things
Credit score is a number that reflects how likely you are to repay another person or company for a loan. In other words, it’s essentially an indication of your trustworthiness when it comes to lending and borrowing money. If you have good credit, it means lenders see you as trustworthy and that you’ll likely be able to pay them back in time and with interest. If your credit is less than stellar, that doesn’t mean you can never get a loan again. You may just need to first work on raising your score before applying for new loans or leases. Your credit score is mostly influenced by how much debt you currently have, how many accounts you have with high balances, and the length of time since your last delinquency on any loans or credit cards – remember that little f word again! Let’s take a look at some common ways to improve your score…
Pay off your high-balance loans.
This one is probably number one on everyone’s list. You see, high-balance loans are the biggest factor when it comes to your credit score. That includes credit cards, car loans, student loans, and mortgages. If you currently have high balances on several of these types of loans, then your credit score will decrease, because high debts indicate that you are a high credit risk. The good news is that by paying off your high-balance loans, you reduce the amount owed on your accounts, and that leads to lower credit utilization. Credit utilization is the amount of credit that you have access to versus the amount that you actually use. For example, if you have $2,000 in credit available to you and you use $1,000 of that, your credit utilization is 50 percent. That’s way too high! The lower your utilization, the better your score.
Don’t apply for too many new credit cards.
Startling as it may seem, applying for too many new credit cards will actually hurt your score, even if you don’t use them. The number of credit accounts you have combined with the number of recent credit applications are the next biggest factors in calculating your score. The logic behind this is that people who open new credit accounts frequently may be trying to artificially inflate their credit scores. If you weren’t able to maintain good credit in the past, then you are even less likely to be able to do so in the future. In other words, the credit card companies are worried that you’ll become delinquent on the payments you owe.
Don’t ignore any past bad behavior.
This one is specific to certain types of debt. Student loans have a special notation on your credit report that will remain even after the loan is paid off. Medical bills often appear on your credit report, even if you have insurance and your bills are being paid by your provider. That’s because the medical provider will send the bills to a debt collection agency, and the debt collection agency will then report the debt to the credit bureaus.
Credit is necessary in our modern, consumer-driven world. It is important to keep your credit healthy in order to have a good future. To maintain a good credit score, you must be diligent about paying your bills on time, keeping your balances low, and keeping new credit card applications to a minimum.
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