How to Raise Your Score
In my last two posts, you have learned what your credit is and how it is derived. This post willhelp you better understand how to raise your score up from the depths of despair.
First of all, please know that it takes time to raise your score. If you need to buy a home tomorrow, but have a score in the 500’s, chances are you will not qualify for a loan. But if you are being proactive and know you have at least three to six months, then take heart, you might just be able to do it if you follow the following things:
- Pay your bills on time – as shown on the graph, payment history affects 35% of your score.
- Keep your credit balances to 30% or lower – how much credit you have access to and how much of it you are using is extremely important. If all your credit cards are maxed out, it reflects poorly on your score.
- Don’t cancel credit cards to up your score – contrary to popular belief, canceling a card could hurt you. The length of your credit history makes up 15% of your score, so if you have had a card for 10 years over one for only a year, get rid of the shorter term card.
- Don’t apply for too many credit cards – when a merchant asks if you want to save 10% on your purchase by signing up for a credit card, just say NO! On spring break and want one of those free tee shirts by just “signing up”?… don’t do it! Too many credit requests on your report makes it look like you are desperate for credit. And you just might use them and put yourself into more debt.
- Watch for the types of credit you use – secured loans like car loans, and mortgages are good types, but unsecured loans, like credit cards, student loans, and so forth are considered riskier. However if you pay your loans on time, the unsecured loans will get a better rating.
Remember, if your score is really low, it could take a year or more to see good improvement. Credit bureaus are not the fastest at updating data from vendors. If you have a bankruptcy or foreclosure, it could take years as the negative comment stays for 7-10 years on your report. Keep your chin up though, if you follow this advice, you will surely come out on top and have your piece of the American pie!