5 Straightforward Ways to Improve Your Credit Score
Published Mon, Aug 15, 2011 Updated Tue, Feb 16, 2021
Your credit could very well determine what you can and cannot afford to purchase. Americans with excellent or good credit often receive the best interest rates, have their credit limits raised, and rarely have to worry about being rejected when applying for a loan.
Those with bad credit scores, on the other hand, often face high interest rates and large monthly payments if they really want to have a loan or credit offer extended to them. Fortunately, improving your credit score is actually a fairly painless process.
Review your credit report
When was the last time you viewed your credit report? You should request a copy of your credit report at least once a year. Many states require the credit reporting bureaus – TransUnion, Experian, and Equifax – to provide one free credit report annually.
When you get your credit report, review it for errors: Is all of your personal information – name, address, and social security number – correct? Are all of your closed accounts listed as closed? Are there accounts listed as overdue when you’ve already paid them off? Find all of the errors and correct them. Reviewing your credit report annually is essential if you want to improve your credit score.
Always pay bills on time
One of the fastest and easiest ways to improve your credit score is to always pay your bills on time. If you’re like some people who procrastinate when it comes to mailing payments, make it easier on yourself. Sign up for online bill pay either with your bank account or through the company’s website. Most companies provide this option, and paperless bills and statements, for free. Paying bills online is fast and easy, and some companies will even send you a reminder of your upcoming due date.
You may also want to use direct debit options when available. Some car insurance companies, for example, will deduct your premium directly from your bank account on the due date. With direct debit, you never have to worry about paying your bills late, and you’ll quickly work your way toward an improved credit score.
Pay your credit card on time each month
If you can, pay your credit card balances off each month consistently if you want to improve your credit score. That’s obviously not easy if you have a lot of credit card debt, but try to work out a budget that will allow you to get your credit card debt at least 30 percent below your total spending limit. Doing so will help improve your credit score.
Avoid applying for new credit cards with low interest rates to transfer current balances. Opening accounts will hurt rather than help your credit score, and creditors prefer to see lower balances on multiple credit cards rather than high balances on a lone credit card.
Take out a loan
One of the best ways to establish and to improve credit is to show creditors you know how to use money responsibly. Taking out a small loan and paying it on time each month will help you rebuild your credit and get your credit score healthier. You’ll probably find a fairly decent interest rate through your local bank or credit union.
Pay on past due accounts
Check your credit report for accounts listed as past due, and if you can, pay them off. You may be able to negotiate a lower payment with the creditor. Having that past due account marked paid, which will eventually be wiped off of your credit report, will not only show creditors you pay your debts, it will also improve your credit score.
Improving your credit score is within your grasp if you’re willing to put in the effort: Pay your bills on time; don’t open new accounts; and pay down your credit cards as quickly as you can. Each small step combined will allow you to take a huge leap toward an improved credit score.