A person's credit score is one of the most important factors in their overall financial health. One of the largest determinants a lender uses when making credit decisions is an individual's rating. While improving your score score is difficult, there are steps people can take to improve their score drastically over time. This article gives the steps needed in how to improve your credit score.
Step 1 – Order a report and score. Knowing your score will give you a basis and understanding of how much it needs to improve before being a qualified credit candidate. After the report is received you should read through it carefully and make sure all information is factual and all negative remarks are justified.
Step 2 – The next step in improving your credit rating is clearing up any erroneous negative marks. Unfortunately, creditors often make mistakes and report false information to the credit agency which can tarnish you report. If you notice any incorrect negative marks be sure to contact the creditor immediately to have the marks cleared off your report. Negative marks can include late payments, closed accounts, or misquoted outstanding balances.
Step 3 – Pay off all charge off accounts. If you have ever defaulted completely on a bill, the negative mark will sit on your credit report for 7 years and will cause significant damage to your score. Paying off your charge off accounts will drastically improve your credit score.
Step 4 – Pay down credit cards. Credit utilization is one of the largest determinants of your credit rating, and should be less than 30%.
Step 5 – The last step in raising your score is to make on time payments. The largest factor in the rating calculation is your ability to make on time payments. By making all payments on time for a period of 12 months, your credit score will increase dramatically.