How to Improve Your Credit Score
You’ve probably heard many times by now how to improve your credit score: pay your bills on time each month and don’t accumulate too much debt. In a nutshell, that is all you have to do. Eventually, as your late payments, charge-offs and other sins of the past fade in to memory, your credit score improves.
There are simple things you can do to improve your credit score:
(4) Pay off your credit cards on a regular basis. The credit card companies report your payment history and current balance to the credit bureaus each month. They do not report that you always pay your balance in full each month or usually pay in full each month. Therefore, if you charged $1,000 on your credit card each month and paid the balance in full each month, this fact would not be reflected in your credit report. Therefore, one who had access to your credit report over a six-month period might assume that you are just paying the minimum required each month and your balance always seems to hover around $1,000. For this reason, it is a good idea to rotate your credit card usage, using one card for two months, then switching to another card for two or three months. This way, a zero balance is reported on your credit report every few months. In the few months before applying for a mortgage or car loan, it is recommended that you pay off all credit cards and not use them so that when your credit score is calculated, your credit report shows zero balances on all your credit cards. If you do this, your credit score will be higher and you will get a lower interest rate.
(5) Don’t apply for too many loans: Applying for too many credit cards and/or loans lowers your credit score. Every time you apply for credit, a notation is made on your credit report. Lenders, seeing too many credit inquiries, might be reluctant to extend you credit. Therefore, if you are denied credit by a lender, fix the problem (if you can) before reapplying with another lender. Try to keep the number of lenders to whom you apply at an absolute minimum. In addition, lenders are concerned about your particular portfolio (or mix) of financing. They don’t want to see too much of one type of credit. A credit report full of credit card accounts but no installment loans scares them, and vice versa. They want to see a mix of various types of credit. (By the way, lenders take into account that your credit report will be pulled by many different lenders when you’re shopping for a home loan. If this is done during a short period of time, about two weeks, it will not damage your credit rating.)
(6) Don’t ignore your creditors. If something should happen that prevents you from paying your bills — such as sudden unemployment or illness — the worst thing you can do is try to avoid your creditors or allow your account to be turned over to a bill collector. If you can’t make a monthly payment, call the creditor as soon as you realize this fact. Don’t wait for your account to go delinquent and for them to start writing you nasty letters before you take action. Doing this will not prevent your credit rating from being damaged — the creditor will place negative notations there anyway — but it will give you some ammunition to later fight to get those negative notations removed. If the creditor works out an alternate payment arrangement with you quickly, you can avoid negative notations on your credit report altogether.
Editor’s Note:
We at Jewelry Outlet always want to remind our customers why it is important for them to obtain and responsibly use credit. One helpful way to improve one’s credit is by adding a trade line and then only using a small portion of the trade line. This is an example of utilization, which is 30% of the credit score calculation. Thus with a top score of 850, the utilization category is 255 points of the total credit score (850 x .30).
If someone had one department store trade line of $500, but had maxed out the trade line by charging $500 of goods and services, then this person would lose almost all of the 255 points (out of 850), having a very high utilization of 100%. Thus assuming all other things on the person’s credit report were good, the highest credit score this person could achieve might only be 595 (850 – 255), as this person might lose all points for having a high utilization.
But if this person obtained another trade line (maybe a jewelry store account) for $5,000, now the person’s utilization would be only 9% ($500/$5,500). Thus this person’s credit score would increase, maybe by as many as 200+ points, possibly bringing the score up to over 800.
The person’s interest rate on an auto loan with a 595 score might be as high as 20%, whereas the interest rate with an 800 credit score might only be 2% to 5%. If someone purchased a $20,000 car, the lower interest rate would save $250 per month, for having good credit and low utilization.
This is the power of low utilization. And this why it is important to obtain a jewelry store trade line with a high limit.
Jewelry Outlet is the number one online jewelry retailer to help you enhance, establish and/or rebuild your credit. We offer easy credit terms for people with bad credit, new credit and no credit. Click here to Apply for Credit
Posted by Christian C Culpepper