Previously I covered 2 ways to raise your credit scores in part 1 of this 2 part article series on credit improvement. That article focused on making sure to pay your bills on time and why you should order a copy of your free credit report. This article continues with tips 3 through 5 on what you can do to legally and naturally raise your credit scores.
Step 3 – Pay Down Your Current Debt
Any debt you owe to include credit card debt is reported to the credit bureaus once a month. It does not matter if the debt was charged for only a few days or from one month to the next because the credit bureaus do not differiate between consumers that carry a balance on their credit cards and those consumers that do not. With that said, by charging less debt on your credit card each month and paying it off each month you can help to naturally raise your credit score. Lending agencies also like to see a lot of space between the amount of debt you carry on your card and the total credit limit. The bigger the gap, the higher your credit score can climb.
Step 4 – Do not Close Old Credit Accounts
This may seem a bit contradictory to what you've typically been told in the past but the truth is, today's current credit scoring methods actually penalize you when you close your accounts, thereby lowering your overall credit score. The reasoning behind this is that by closing your old accounts you actually eliminate the distance between your credit limit and the actual debt you carry. This causes the credit score calculations to lower your score a minimal amount but in the case of your credit, everything that raises or lowers your score is worth mentioning.
Step 5 – Stay Out Of Bankruptcy
Without a doubt, filing for bankruptcy is the worst thing you can do to damage or completely destroy your credit score. It has been proven that a bankruptcy lowers your credit score by a minimum of 200 or more points and they are extremely difficult to recover from because most bankruptcies stay on your records for up to 10 years. This has the impact of allowing lenders to easily charge high interest rates against you for any loan you attempt to obtain. If bankruptcy looks like an option you should make sure and seek out credit counseling first in order to try and salvage your financial health.
By following the advice and tips outlined in this article and part 1 of this article series you will be able to enjoy better interest rates and obtain loans easier because your credit history and scores will show that you are not a credit risk to your prospective lenders.