Credit Score Makeover Series, Part 1: 6 Ways to Improve Your Credit Score

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Who doesn’t want to improve their credit score? Everyone knows the lower your credit score is, the higher the interest rate and vice versa. Like you, my credit score could range from 300-850. So, the closer my credit score gets to 850, the happier I become.  What if I told you that whether your credit score is 520 or 750, you could benefit from reading this blog? If you follow these tips going forward, you will not only improve your credit score but you could potentially save hundreds or even thousands during the life of your loan or credit card debt. I know that I am eager and motivated to improve my credit score for the New Year. How about you?
1. Make all your monthly payments as scheduled. Your payment history contributes to 35% of your credit score. Past due or delinquent payments, as well as accounts in collections have a major negative impact on your credit score. The timely repayment of debt is one of the most important factors in your credit score. So, paying your bills on time each month will have a positive impact on your credit score. Don’t focus on the past, just make every effort to make at least the minimum payment on time going forward. The more you pay your bills on time, and the longer you pay your bills on time, the higher your credit score.
 2. Reduce your amount owed by paying down or paying more than the minimum required each month on all credit cards or revolving debt. Paying more than the minimum required each month is an effective way to improve you credit score. To makeover or increase your credit score, you want to focus on getting your revolving utilization as low as possible. The way to accelerate this makeover is to pay down or pay off your credit cards. Your amount owed contributes to 30% of your credit score. So, the most effective way to improve your credit score in this area is to reduce the balances on your credit card as well as any other revolving debts. Another great tip is to avoid charging or carrying a balance close to your credit limit because this will also lower your credit score. Lenders consider this behavior a sign of a higher credit risk. A good rule of thumb is to not charge more than 30% of your credit limit on  your credit cards or revolving lines of credit. The lower your credit score, the higher the interest rates on your loans. So, reduce your balances on your credit card debt and any revolving debts by paying more than the minimum required each month. Ultimately, implementing these changes will improve “makeover” your credit score.
3. Avoid opening up more credit accounts than needed. Your new credit contributes to 10% of your credit score. The most effective way to improve your score in this area is by only applying for/or opening new credit accounts as needed. Applying for/or opening too many new accounts in a short period of time is associated with being a higher credit risk, and a higher credit risk classification will lower your credit score. An inquiry is placed on your credit report when you apply for new credit and too many inquiries will affect your score. Opening up more credit accounts than I need gives me more accounts to manage, more opportunity to purchase on credit, and may make it more difficult to make my monthly payments for each of my cards on time. Therefore, also making it more challenging to pay down my credit card and revolving balances, or make the minimum payment on time each month. Many new credit inquires in a short period of time implies that you may be taking on more debt than you can handle or you are desperate for a loan. Avoid opening up more credit accounts than needed, and resist the temptation to open 4 new retail store cards while visiting the mall.
4. Review your credit report for errors. Check your credit reports for mistakes and then work to correct the error. With the Equifax breach, many individuals have had their information compromised. The most effective way to improve your score in this area is by working to correct the mistake. Unfortunately, mistakes on your credit report may lead to declined credit, higher interest rates and may even prevent you from getting certain jobs that require you to have a satisfactory credit history. Typically, your credit report is updated within 30 days to show that the balance is paid in full. If not, you can dispute the item, and credit bureaus are then obligated to review the matter. Providing proof that a debt is paid in full will help to speed up the review. Otherwise the resolution of your dispute could take months versus weeks to update and reflect a positive change to your credit score. So, examine your credit report for inaccuracies, and then work to correct any errors. You can order or review your free credit report annually through Reviewing your credit report at least once a year will not affect your credit score as long as you order directly from one of them. You can also schedule a credit health education session with a certified financial services specialist at Apprisen to come up with a detailed action plan to improve your credit score.
5. Sign up for a credit health education session. Apprisen offers a Credit Health Education session for those in need of understanding their credit score. Our certified Financial Services Specialist (credit counselor) will obtain a copy of your tri-merge credit report which includes scores and reports from Experian, Equifax, and Transunion. You will work with your FSS a nd they will teach you how to read and interpret your credit report. You will also review how to dispute inaccurate information, and they will show you how to protect yourself against Identity Theft. The credit health education session is offered in the office, over the phone, or online. Call 1-800-355-2227 or visit us online at to discuss your financial concerns, and move one step closer to economic security.
6. Avoid closing your accounts once they are paid in full. Your full credit history contributes to 15% of your credit score. Therefore, the length of your credit history is important. Closing a credit card account that is paid in full can actually lower your credit score by reducing the length of your credit history, and negatively affects your utilization rate by increasing your credit utilization. Keep in mind, increased credit utilization lowers your credit score. So, the most effective way to improve your score in this area is to avoid closing accounts once they are paid in full. The longer you pay your bills on time, the higher your credit score.  Avoid closing accounts that are paid in full, and avoid closing unused credit cards as a short term strategy to raise your score. If you have overwhelming credit card debt, then it could be in your best interest to close the credit cards while on a debt management program. Especially if you are falling behind on your payments. This is done in trade for a lower interest rate. Debt management agencies, such as Apprisen works with the creditors to reduce the interest rates, and waive late fees going forward. The great thing about a debt management program is that it allows you to quickly pay down the balance, because more of your payment is applied towards the principal while on the program versus when you pay your creditor directly.
 View PART 2 of the Series.  Continue to learn how to get your credit back on track and get financially ready for the New Year by reviewing PART 2 Here: Credit Score Tips

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