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Three Ways to Improve Your Credit Score
Your credit score is one of your most important financial assets.
The quality of your score can affect
everything from your ability to get a loan (and the rate you are
offered) to the cost of your annual car
insurance premium. Here are three ways you can help ensure your
credit score is as high as it could be.
(Remember, if you are trying to improve your credit rating that
you aren’t repairing your score, you are
rebuilding your history. The only way to improve your score is
to establish good habits and continue them
over time.)
- 1. Make Payments on Time. One late payment can stay on your credit
report for up to 7 years. Be sure to
make payments on time. Using auto bill payment can keep your payments
from being late.
- 2. Pay down debt. If you have fixed rate loans, pay the minimum
to free up cash to pay down debts with
variable rates (such as equity loans or credit cards). Once you
have paid off the variable rate loans, you can
make larger payments toward the fixed loans.
- 3. Open a savings account and keep it growing. A savings account
shows the credit agencies that you are
serious about saving toward the future and that you have cash reserves
on hand that you could use toward
your debts. Consider making automatic deposits every pay period,
so you can keep your nest egg growing.
Pay Attention to “The Three C’s”
The guidelines that creditors use to decide when to grant
you credit are character, capacity, and collateral.
- Character: How responsible you are in paying your bills.
Paying on time is important.
- Capacity: Your ability to repay loans based on
money management skills, income, and financial position.
- Collateral: What assets you have to offer if you
don’t pay
back the loan.
