Improving Your Credit Score

Whether you are seeking to buy a home or make another large purchase, it is important that you have a good credit score. Many consumers do not think about this until they are already in the process of buying a house, and then they realize that their FICO credit score is not what it should be. Don't make that mistake-follow these guidelines to improve your credit score now:

1. Get a copy of your credit report. In most states it is now the law for you to be able to receive a free copy of this report. Look over it carefully and make sure there are no errors. If there are errors, correct them as soon as you can.

2. Do not open credit card accounts that you will not be using, and do not open a lot of new accounts in a short period of time. Just because you get a free gift or 10% off a purchase for opening a credit card, if you do not intend to use the card or you already have many cards, think twice before you open a new account. The free gift may not be worth the reduction in your credit score.

3. Be sure to pay your bills on time. You obviously do not want a lot of 30 or 60 day late payments, or worse, unpaid bills on your credit report.

4. Keep your credit card balances low. If you have a card with a $5,000 limit on spending or cash advances, keep your purchases at $1,000 or below. If your card limit is $25,000, keep the balance below $7,000.

5. If you have some bad or questionable credit on your report, open some new credit accounts and pay them promptly and responsibly. Lenders will want to see that you are able to handle paying off debt in a timely manner.

6. Do not worry if you do have credit cards or loans. As long as you do not have too high of a balance on the credit cards and you are paying them off regularly and promptly, this can actually improve your credit score.

These are just some of the ways you can improve your overall credit score. Keep in mind that credit scores affect many areas of your life from loans to interest rates to job offers (potential employers sometimes check credit scores). Your credit score is affected very quickly by negative credit. Paying bills on time and other positive credit will probably not improve your score for 6-12 months.