The Federal Reserve Bank offers some basic tips to follow in order to improve your existing credit score:
Pay Your Bills On Time – The quickest way to negatively impact your score is to miss monthly payments on your credit cards or other debts. In fact one late payment can affect your score for years. Bottom line – stay current with your monthly obligations.
Pay Down Large Balances – As you pay down an outstanding balance on a credit card or mortgage, your credit score is likely to increase. In contrast moving balances to new credit lines can decrease your score.
Don’t Max Out Your Credit Cards – Scoring algorithms compare the amount of debt you have relative to your established credit limits. When the amount you owe is close to your limit, your credit score is likely to suffer. Try to carry a low balance, no more than 15% of your credit limit on your cards.
Keep Your Credit In Pristine Condition – A short credit history will have a negative effect on your score, since you have not established a track record of your creditworthiness. However a short history can be positively impacted with timely payments and low balances.
Understand The Impact Of Your Past Actions – If you have a short sale or foreclosure in your financial past you will have a black mark on your credit history for up to seven years. A bankruptcy can impact your report for up to ten years. Your credit score will improve over time as past transgressions age, but you need patience combined with three to five years of good long term credit behavior.
Don’t Apply For Too Many Accounts – Do not apply for a variety of credit over a short period of time. A lot of new credit activity will negatively impact your score. Resist the urge to apply for the credit offers that appear in your mailbox.
Maintain A Mix Of Credit Types – A good credit report will contain a mix of installment loans and credit cards.
Correct Mistakes In Your Credit Report – Under federal law you are entitled to get one free credit report from each of the three credit reporting agencies once per year. To order, go to www.annualcreditreport.com – which is the only authorized source for a free credit report. Regular monitoring of your history brings attention to mistakes in your report, and can alert you to a pattern of identity theft.
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