A person’s credit score holds a lot of power. This one number will decide a person’s borrowing ability throughout their life. Most people want to figure out how to make their credit score as high as possible, but they don’t know where to start. Here are a few tips to help a person start right now to improve their credit score.
Know current credit score
Before a person can improve their credit score, they need to know their credit score. This is a number ranging from 300 to 850 and is the means to all of a person’s borrowing costs. A person is able to get a free credit report each year, but to get their actual credit score, a person will need to pay for it. A FICO credit score (the score that lenders use) can be obtained from FICO.
Pay down or pay off credit cards
After a person finds out their credit score, there are a few things that they can do to help improve their number. An important thing to do is pay down or pay off any credit cards. Paying off loans such as auto loans, mortgage, and student loans is important, but a person’s credit score is more affected when they pay off their credit cards. Since the formulas for figuring out a person’s credit score like to see a large gap between the amount owed on a credit card and the actual amount of available credit, it is wise to pay down the credit card that is the closest to its limit.
Don’t overuse credit cards
Even if a person pays off their credit card bill each month, racking up a huge bill can hurt their credit score. A person can help improve their credit score by limiting their charges on a credit card to about 30% or less of the spending limit on their card. This can be hard to keep track of, but a person can go online and check their account regularly or record their spending on a check register.
Start using an old credit card again
When it comes to a credit score, older is better. If a person has an old credit card this can be a key to improving their credit score, but only if they use the card. Sometimes if the credit card holder stops using their card(s) the issuer will stop updating the account(s) with the credit bureaus. So even though the accounts will still appear on the credit report, they will not be as important as if the person was currently using the credit card.
Dispute significant errors
There are some small errors in a person’s credit score that they shouldn’t worry too much about such as incorrect or outdated address information or an old employer listed as a current employer. Most of the time these errors are made by the company reporting them to the credit bureau and aren’t worth worrying about. Errors that are worth being concerned about include: credit limits reported as lower than they actually are, late payments or collections that aren’t the person’s, negative items that should have automatically fallen of the credit report that are older than seven years (or 10 years in the case of bankruptcy) and accounts that were included in a bankruptcy that are listed as unpaid. Taking the time to try to correct these errors will usually help improve a person’s credit score.