Your credit score is something that reflects your conduct as a borrower. In the days of global crisis and financial uncertainty, it is at least something that you can have control over. Although you may think that your creditworthiness does not matter now, it may become a crucial factor sometime in the future if suddenly you need to get a new mortgage because you just lost one job and are moving for another. Or you may have to apply for college loans for your child. During this time of crisis there is a great chance in your life that an immediate need for loans surfaces. If this happens you may not have enough time to fix your credit score and therefore it is a wise decision to focus on your creditworthiness now.
To access the credit history that serves as data for the score, you can go to http://www.annualcreditreport.com and get it there for free. You can also get a free credit score report here. Although 720 is the approximate average credit score, some lenders tend to become stricter at this level and may cause you some problems. So you might want to consider improve your standing even if your score is close to 700-720.
Here are several tips that you can do to improve your credit score or preserve it:
1.) Look for any kinds of error. You may find an account that you don’t recognize. Unless it is just a simple error, maybe new accounts are being opened in your name without you knowing it. You may also find wrong indications of late payment or others. If you find any errors at all, report this to your credit bureau as it may hurt your credit score.
2.) Avoid late payments. 35-40% of credit reports show late payment. Although you may think this is a common thing amongst borrowers, do know that late payment/ payment on time accounts for (more or less) 35% of the credit score calculation. The easiest way to avoid late payment is by setting up an automatic monthly payment through your bank account.
3.) Understand the correct definition of ‘debt’. Most people don’t understand that the credit report data shows your debt that you owe, for example, a credit card company at the end of the month before you pay the bill. We usually assume that if we just pay off all the balance in our credit card every month, our debt is zero. But, unfortunately, that is not the case. Even if you throw a lump sum of $3000 into your credit card to pay it off completely, the bill that comes to you before you pay states that you owe $3000 and that is what is shown in your credit score. One way to improve your credit score here is to just leave your card unused for several months so that the balance would be zero for those months.
4.) Stay away from retail cards. Approaching gift-shopping season, there will be a lot of discount deals by opening store credit card accounts. Although you may be tempted to do so in order to get the 10% off deal, opening more and more credit cards will definitely hurt your credit score. It always best to pay your shopping with cash. Or at least, use your existing card.
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