Improve Your Credit Score

Take steps now to improve your credit score. One of the most important financial moves you can make is being proactive when it comes to your credit. It all seems to boil down to that three digit number, your FICO score. This number which is based on many factors can determine the amount you can borrow, the interest rate you pay or even rates on car insurance or whether you get that new job. The good news is that there is plenty you can do to improve your credit score, and it's never too late to start.

The first thing to do is get a copy of your credit report and look over it thoroughly for any errors or discrepencies. Make sure you get your FICO score along with your credit report. This number can range from 300 to 850, (the higher the better) but it is rarely under 500. Any errors, as small as they may seem, can take away from your credit score. Fixing them, even if it is time consuming, is worth the effort as it can raise your credit score. Most reports will give you details on who to contact or what needs to be done if you notice any errors.

A few simple things can make you look better to lenders. Number one is to pay your bills on time. This has the greatest bearing on your credit score. The second most important factor is your ratio of debt to credit limit (how much you borrow vs. how much you can borrow), so live well within your limits. Try to use 30% or less of available credit, this will look good to lenders. More than 70% is a serious drain on your score. Next, be careful about opening and closing credit card accounts. Your older accounts are your most valuable. If you cancel older credit cards, you may be shortening your credit history, and since the length of your credit history is another important factor, you may be damaging your score. Opening too many accounts can also hurt your credit score. It's so tempting this time of year to open that store account to save 10-15%, but your credit score may suffer, so be careful.

If your credit score is hurting due to maxed out credit cards and late payments, it's not too late to work on improving your bad habits. Start paying your bills on time and try to pay down those balances. If your problems are more serious, you might consider credit counseling, which will not be as damaging to your credit as bankruptcy, which stays on your credit report for 7 to 10 years. You can make a huge improvement in your credit in as little as 2 years. Creditors consider recent behavior a much better indicator of your credit worthiness than what you did in the past. And a 24 month history of paying your debt down and paying on time, can greatly improve your chances for a better score.