10 Ways to Improve Your Credit Score

…save money on buying homes and lowering your debt

10 ways to improve your credit score and reduce stress in your marriage 
 
 

Credit scoring is one of the deep, dark secrets of our modern financial world. While millions of Americans know they have a “credit report”, few understand what it means. Even more, if you aren’t careful, new, high-tech credit scoring processes will hammer you with higher pricing for your home, car, insurance, and other consumer items.

Unless you live on a “cash only” basis, you have already been scored. The most commonly used credit score is a three-digit number, ranging from 350 to 850. The number rates how much of a risk you are to a lender or insurance company. Lower scores predict higher risks, which create higher prices.  Higher numbers indicate less risk and the potential for lower prices.

Now it gets interesting. In the past, if you had steady income and always paid your bills on time, you were in good shape. You could get a fair loan at a fair price. That’s not always true anymore. Now, price and interest rates are tied to your credit score, along with several other factors. You need the highest credit score possible or thousands of your hard earned dollars could go down the drain. Here’s a “short course” in what to do to increase your credit score, pay lower prices, and save money:

  1. Check your credit report. Find out what’s really in your report and what your score is. The main credit reporting agencies that keep up with this information are Equifax, TransUnion, and Experian. Each one has a website by that name and also a toll-free contact number.
  2. Dispute any errors. Research indicates that most credit reports have errors in them. Many of these errors are significant, too, and are causing the credit score to drop dramatically. If you haven’t checked your report, you could be paying more than you should and not even know it. If you find errors, report them to the agency that issues your report. Federal law gives thirty days to investigate and remove any mistake.
  3. Pay all your bills on time. The credit scoring industry admits 35% of their score is based on your history of payment.  Paying all your bills on time is the most important thing you can do to get (and keep) a high score. Lenders use computers to report you as late, even if your tardy payment was only an accident. Even paying one or two days late can deflate your score.
  4. Reduce your credit card debt. 30% of your credit score is tied to the size of your total debt as a percentage of your total income. This means if you owe too much money for their secret formulas, your score will drop, even if you pay on time. Your best defense is to pay off debt as quickly as you can, or at the very least, keep your outstanding credit or charge card debt less than 50% of the total credit available.
  5. Pay more than “the minimum”. Paying the minimum required payment is a tactic used by the credit card companies to lead you to stretch out your payments. This allows them to charge you interest for a long, long time. You might even pay for more than 30 years! However, if you pay more than what’s required, you’ll not only save a fortune in interest, you’ll raise your score more quickly.
  6. Take care of your established credit accounts. Another way to increase your credit score is by having a long, positive history with a few lenders. Also, once you’ve opened a credit account, don’t be too quick to close it. Contrary to public opinion, closing unused accounts sometimes hurts your score.
  7. Don’t apply for new credit unless you really need it. Credit scores typically drop when you request or open a new account. So be careful when you open a new charge account. Getting “90 days, same as cash” or even a free floppy hat or beach towel is not usually worth the hit on your score.
  8. Check your credit at least once a year. Make this a part of a regular, financial “check up.” If you’re working to increase your score, check it at least once a quarter and note your progress.
  9. Protect your identity. The FBI announced recently that “Identity Theft” is one of the fastest growing crimes in America. Your financial identity is tracked primarily through your social security number, mailing address, and other personal information. Keep this information confidential.
  10. Be patient. It will take time for the system to raise your score. But every positive step matters and, in nine to eighteen months, you can raise your score dramatically.

Dr. Kregg Hood preaches, teaches and consults in the area of stewardship, financial ministry, and helping people understand God’s powerful principles for managing money.  He has authored three books, including his latest Escape the Debt Trap.  He and his family live near the Dallas/Ft Worth Metroplex.