4 Simple Ways to Improve Your Credit Rating

Your credit score is the single most important factor in determining interest rates and eligibility for credit. If your score is not up to par, following a few simple steps to improve your credit rating can save you money in the long run.

1. Pay on Time

Paying your bills on time is an easy way to bring up your score. Payment history determines 35% of your score, so paying on time is the single best way to raise a score. Setting up automatic drafts can help those who are forgetful about due dates. You can have your bank send a check for you, or have the company draft your account. Usually these are free services. If you are making late payments due to insufficient funds at the time of the due date, often creditors will allow you to adjust your due date to match with your pay date. A simple call could save you late fees and dings to your credit.

2. Lower Your Debt

30% of your credit score is determined by how much you owe in contrast to how much credit you have. You want your available credit to be at least 70% of your credit line. Paying down high debt to limit cards will drastically change your score for the better. Creditors want to see that you can be given a line of credit without spending every available dollar. If you can't pay your cards off, it can sometimes be beneficial to transfer the debt to a card with a higher limit.

3. Keep Credit Lines Open

It is a huge mistake to close credit lines after they are paid off. Your credit score is partially composed of the length of credit history. It is common for people who have had debt problems to close everything after the debt is paid, but you don't need to close the accounts simply to prevent you from using them. Cut up the cards or put them in a safe deposit box where you can't easily access them, but leave the accounts active.

4. Obtain New Credit

If the last time you applied for credit was ten years ago when you bought a car, then you probably have taken a hit due to no new credit history being established. Just as important as old credit is to your score, new credit contributes to 10% of your FICO score. If you are applying for credit for the first time, using a secured card can be a great way to go. Banks are often hesitant to extend credit to those with no history, but a secured card is of no risk to the lender. The bank will require you to make a deposit of $300 to $500 dollars into a savings account. This is your maximum limit. You can use this secured card for six months, pay on time and never go over your limit, and you should be able to apply for a standard credit card.

Can you drastically improve your credit score in six months?

It is possible to improve your credit rating drastically in six months' time. However, it may not be possible for everyone. It really depends on what was causing your credit score to be low in the first place. For example, if there was some type of a credit reporting mistake, you could get it taken care of quickly. However, if you have been in the habit of not paying your bills, it may take longer than six months to repair the problem. You could hire a rapid rescoring company to take a look at your credit file and make quick changes to it. 

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