How to Improve Your Credit Scores
posted August 15, 2009 - 5:51pm
Want a better credit score? You should, it determines whether or not you get a loan, and what the interest rate will be. This can mean tens of thousands of dollars to you in your lifetime. This article will explain the basics of credit
scores to you and ways you can improve them.
A credit score is a 3 digit number that estimates your creditworthiness. It is a look at how you you've managed credit and bills in the past. The score helps lenders and creditors determine whether you're a good potential borrower. Typically, credit scores range from 300 to 850.
First determine what is a good credit score. Most people would agree that it's a score of 650 or higher. People having credit scores of 700 or higher are likely to get credit at better rates of interest. Those with credit scores in the range of 350-600 are considered to be high risk to creditors. Because of this they will typically be charged high rates of interest. Depending upon the current market conditions, they may not be able to get credit at all due to their scores. Your goal should be to have the highest score possible and never fall below 650.
Next make sure you know what a FICO score is. A FICO score is the most common credit score used by creditors and lenders to determine if they should give you a loan, and if so, at what rate. This was created many years ago by the Fair Isaac Corporation (FICO). Experian, Equifax and TransUnion are the three main credit reporting agencies. There are hundreds of sites online that will help you obtain your scores from these three agencies for small fee (typically about $40). However, scores offered by each credit reporting agency (CRA) or credit bureau is typically different because they receive different information from different creditors at different times. Furthermore, they all have their own proprietary model for determining credit worthiness.
The next step is to find your middle score from the three agencies, Experian, Equifax and TransUnion. This is the most commonly used score by lenders and creditors. This is the score that you should be most focused on improving. For instance if my three scores are 600, 635 and 675, then the score that I want bring up is not the 600 but the 635, as this is the score most lending and credit institutions will be looking at.
Then try to improve your middle score by reviewing the records from Experian, Equifax and TransUnion that you purchased online. Look for errors in the report that you can contest to see if this will boost your overall credit score. Many times you will get help in contesting these errors from the service you chose to use online to get your original scores.
Next, use the following methods to try to boost your credit score. 1) Make sure that you always pay your bills on time. The easiest way to do this is to set up automatic bill pay. I always try to pay a week or more ahead of time and at least one dollar over the amount owed. 2) Try to pay down your various loans, especially credit card debt. 3) Consider closing down any credit cards that you don't need, because the available credit on each (the amount you can charge at the drop of a hat) is hurting your credit rating. But don't do this with your primary credit cards, that have a long history, because this can potentially erase their positive impact on your credit rating. 4) Keep the number of credit inquiries down. If you, or company do business with, pulls your credit report too often this can lower your credit rating temporarily.
By: Paul Cline. For more FREE resources, visit my website at: www.advancedtrainingseminars.com
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