Improve Your Credit Score In Two Easy Steps
There are many ways a person can improve his or her credit score, I will explain two very crucial ones to you here.
A good credit score is important in order to get the loans and interest rates that you want. To financial institutions, a credit score reflects the likelihood that you will repay what they lend you (i.e. mortgage, credit cards, car loans, student loans, etc.). Therefore, one of the most important ways to improve and keep a good credit score is to always, always pay your bills on time. Missing a payment or paying late even once will drop your credit score and if you make a habit of it, you will have bad credit. Paying on time makes up 35% of your credit score. Since you are going to be making payments anyway, it is very important to make them on time. Of course, the later your payment is, the worse it affects your score, so if you have to make a late payment pay it as soon as possible.
Another important way to keep a good credit score is to keep a good ratio between your credit balance and your credit limit. For example, if you have $5,000 worth of credit card debt and you have a $6,000 limit that means you are using up about 83% of your available credit, and that will damage your credit very negatively. On the other hand, if you have $2,000 worth of debt and a $10,000 limit, which amounts to 20%, it will improve your score. This is an important thing to keep in mind when you are transferring balances and closing accounts. For example, if you have four cards amounting to $2,000 in debt, and each card has a $2,000 limit totaling to a $8,000 limit, but you decide to move all your debt to two of those cards and close the other two, your limit will be reduced to $4,000 and now your ratio is at 50%; this is will negatively affect your credit.
Keeping your credit if good standing means that you will occasionally receive credit limit upgrades, but just because you have it does not mean you should use it. Whenever you receive a limit upgrade, you should just see it as an improvement on your credit rather than as more money you can spend.
If you follow these two simple steps then your credit score will rise dramatically.
Mike writes about ways to find credit score. If you want to find out how credit score works then visit his website for more information.