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How Do I Improve My Credit Score? Discussion of Do's and Don'ts
By Heather Carroll
If you have ever applied for a loan or credit card, then you are well aware of the fact
that your credit score can negatively or positively affect whether or not you live in a
nice home or drive a decent car. Even potential employers, landlords and insurance companies
often times look at your credit report to determine whether or not you are a risk.
However, credit card companies are very quick to extend credit to almost anyone
regardless of their age, income, and even employment status. Large credit limits are given
to college students and the unemployed and recently, a major credit card company issued a
card with a $600 limit to a six year old. This makes it very easy to live beyond your
means and get into financial trouble thus lowering your credit score.
Your credit score is determined based on five different criteria:
• payment history (35%)
• total amounts owed (30%)
• length of credit history (15%)
• new credit (10%)
• type of credit in use (10%)
A persons credit score ranges from 300-850 and will differ depending on the credit bureau.
The breakdown is as follows (but like your actual credit score, these ratings will vary slightly
among the credit agency):
• 310-619 is a poor rating
• 620-659 is a fair rating
• 660-749 is a good rating
• 750 and above is an excellent rating
Surveys have found that approximately 11 percent of the population has a credit rating over 800.
Even if you do not have a low credit score currently, you may still want to increase
your score to get a lower rate on mortgages, car loans, and credit cards. However, with an
estimated thirty million Americans having scores in the poor range, improving your credit
score may have become necessary to those wanting to make any major purchase.
The first step in doing so is to get a free copy of your credit report from each of the
three major bureaus. It is important to get a copy of all three reports because information
may be correct on one, but incorrect on the others. Look at each of the three reports carefully
and determine if all of the information is correct. If you find mistakes, contact the
bureau and ask that the incorrect information be removed.
Once you have done some housecleaning on your credit reports, now is the time to start
repairing or improving your credit. First and foremost, begin to pay all of your bills on
time. Even one late payment can have a huge impact on your score. The last five years of
payment history is the most important so even if you had late payments in the past, you
can still improve your score now with prompt payment. Also, making payments to credit
cards on time and for more than the minimum payment will result in increased lines of credit.
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