How to Improve Your Credit Score

Establishing a good credit history is so important today. Not only does a good credit score help you secure good rates when you apply for a mortgage or want to buy a new car, it can also determine the kind of jobs you get and the amount you will have to pay on insurance. Even a minor mistake, such as a late bill payment or applying for too much credit at once can all be things that stay with you for years to come. If you are new to credit scores, you have a good opportunity to build a good credit history in the correct way. This article will show you what to do and what you need to avoid.

How to improve your credit score #1 Check your credit report

The first thing you will want to know is what lenders have to say about you. This information is held by the three following major credit bureaus: Equifax, Experian and Trans Union. Credit reports are used to create your overall credit score, which is the three-digit numbers lenders use to check your credit worthiness. Lenders may not stop there, but may choose to look at the actual report itself, as well as landlords, employers and insurance companies. You can still have a credit report even if you have never had credit. This can easily occur if someone else's information gets mixed up with your report, either through a mistake on the part of the credit bureau or because of identity theft. If someone uses your personal information to open fraudulent accounts, your credit will suffer. If this has happened to you, you will need to clean up your credit report before you apply for any new accounts. Go to the Federal Trade Commission where you will find helpful information on how to do this.

How to improve your credit score #2 Open a checking and savings account

It is easy to overlook some very basic steps when people are trying to seek credit. One such step is the need to have a checking and savings account. Lenders will look at this as a sign of stability and be more willing to extend credit to someone if they have a checking and savings account. If you are still a minor, it is a good idea to open a checking and savings account, so that you can start to build a credit history. Although a person cannot get a credit card until they are 18, many banks have no problem in letting minors open checking and savings accounts.

How to improve your credit score #3 Understand credit scoring

In order to understand the basics of credit scoring, you will need to know the two most important factors in your credit score. Do you pay your bills on time? How much of your available credit do you actually use? It is very important to pay all of your bills on time, regularly. If you need a reminder, set up automatic payments or some other reminder system that will alert you to when your bills are due. Just a single missed payment will ruin your credit score. It can then take seven years for the effects of this one action to disappear.

Another point to bear in mind is to avoid maxing out your credit cards. Aim to keep your credit to less than 30% of your credit limits, which will help you to get the best credit score. It will also help to keep you from sinking into debt.

It is not true that having a balance on a credit card will help you to have a good credit score. The best thing to do is to make sure you pay your credit card bill in full each month. It will help to keep your finances in shape and build your credit at the same time.

How to improve your credit score #4 "Borrow" someone's credit

Young adults who are just starting out will need some help to establish their own line of credit. The fastest way to do this is to "borrow" another person's record, by being added to someone else's credit card, such as your parents', or to be an "authorized" or joint user by asking someone else to co-sign a loan for you. If you have a co-singer, you can qualify for loans that you might not be allowed to get on your own. This loan will show up on your credit report. If you then proceed to pay it off in a timely fashion, it will help to boost your own credit score. However, if you default on the loan, the co-singer will also suffer from the consequences of your actions. A co-singer has promised to make sure that any loans will be paid, which means any defaults will show up on their report as well, even if they are not to blame.

An "authorized user" is risky for you and for the person who gives you access to their credit card. For example, if your mother authorizes you to use her credit card, her history with that credit card account will be imported to your credit bureau file, which gives you an instant credit record. If she has handled the account well, that will also reflect well on you. However, any of her mistakes will also be viewed as your mistakes too. Late payments or other problems that came up could make it hard for you to get future credit than if you had chosen to establish a credit history with no help.

These suggestions have hopefully provided you with some basics on how to improve your credit score, ways to establish a credit history if you do not have one and ways to keep a good credit score.

Source:

http://articles.moneycentral.msn.com/CollegeAndFamily/MoneyInYour20s/9waysToBuildAKillerCreditScore.aspx?page=1