A Good Credit Score Can Be Yours

Would you like a good credit score? Although there’s no instant formula to achieve this, there are steps you can take to improve your credit.

The first step is to order a copy of your credit report. Go through it and look for any errors or unusually old negative items. Most accurate negative information like unpaid debts or bankruptcies can be reported for seven to ten years. Unpaid judgments can be reported for seven years or until the statute of limitations runs out, whichever is longer. Generally the time starts on the date the event took place.

If you find inaccurate or old negative information, you can dispute it. Contact the credit reporting agency and the creditor. Send copies (not originals) of any supporting documents if you have them. It’s always best to send this in writing by certified mail with a return receipt requested. This way you have proof your letter was received.

After any corrections are made, the credit reporting agency is required to send an updated copy of your credit report. Although you’re only entitled to one free credit report from each agency every 12 months, this one doesn’t count against you.

Good Credit Score

Once any mistakes are corrected you’ll have a more accurate score. These scores will range from 300 to 850. However higher numbers indicate a good credit score.

Your score is calculated using a variety of information. The largest percentage is given to payment history. Obviously if you pay your bills on time, your score will be higher, if not your score lowers with the frequency of late payments and how late they are.

Make every attempt to pay your bills on time. Delinquent payments and collections will negatively affect your credit score in a major way. If you’ve been late in the past but have improved your payment history, most lenders do take that into consideration. The older the delinquencies, the less impact they have on your score.

If you have missed payments, catch them up and stay current. Again the longer you have been current the better your credit score.

If your account has been sent to collections, be aware that paying off the balance will not remove that item from your credit report. It will stay for seven years. So try to make arrangements with your creditors before this happens.

One of the best ways to improve your payment history is to have a budget that works. However, if you find you are having trouble paying the necessities, talk with your creditors and try to work something out. This may not immediately improve your score but over time, if you pay like you agreed, it will result in a good credit score.

The second largest item used to figure your score is outstanding debt. After you have a budget and your living expenses are under control, start trying to pay down your debt. Your credit score significantly lowers if you owe more than 75% of your available credit on revolving credit accounts. Obviously less would be better but do aim to lower your debt-to-credit ratio.

It doesn’t really help your score to move debt from one account to another. Credit cards sometimes offer balance transfer options which could help temporarily with your interest rates. However, the lower rates usually go up after a certain period of time and you’re still stuck with the debt. If you do choose this option, don’t close cards that you pay off. This will lower the amount of available credit and lower your credit score.

Another factor in figuring your credit score is length of credit history. The more history you have, assuming it’s not all bad, the better. This factor, like most of the rest of them will take time to build. While you are building your credit history, try to follow the first two tips. Always pay your bills on time and don’t carry a lot of debt.

If you are just beginning to manage your credit history it’s harmful to open a lot of new accounts in a short period of time. This will make having a good credit score almost impossible. You will appear risky to lenders and they will penalize you for it.

The types of credit you have also factors in to your score. A well balanced mix will help insure a good credit score if managed well. If you don’t have a mortgage, you may have an auto loan, personal loan, credit cards or student loans. If these are paid timely, it shows you can handle the responsibility and lenders will reward you.

It’s important to remember to build these accounts slowly. Apply for a credit card or two but use them sparingly. Make every attempt to pay them off each month. Someone who has credit cards and a good payment history will usually have a higher credit score than someone with an equal payment history and no cards.

One more thing credit reporting agencies look at is new credit. Anytime you apply for new credit it will temporarily lower your score. However, if you are pay responsibly, over time these accounts can help you achieve a good credit score.

Do keep in mind that if you’re shopping around for mortgages or other rates which require lenders to make hard inquiries on your credit, it’s best to do them as close together as possible. Most of the time, the credit agencies will group them together as one inquiry if they’re not done too far apart. This will reduce the impact on your score.

Again, only apply for new credit when you need it. And always check your budget to insure you can comfortably afford the new purchase.

These are tried and true ways to achieve a good credit score. And these are the only legal ways of doing it. Don’t fall victim to ads from credit repair services promising quick, easy ways to instantly improve your credit. Some of these companies will not only take your money and do nothing to improve your credit but some will even advise illegal activities that could cost you far more.

Just remember, a good credit score is achievable even if you’ve made mistakes in the past. You’ll be rewarded when you turn things around and use these tips to improve your score.

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