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Improving Your Credit Score

Tuesday, September 4, 2012 - Article by: Daniel - The Federal Savings Bank - Message

5 Steps to Improving Your Credit Score

There are no quick fixes when it comes to your credit. However, if you're willing to take the time, you will eventually be able to raise it through careful budgeting and management. With these five steps, you may be able to considerably improve your credit score:

Check for Inaccuracies
First and foremost, you must ensure that your credit report does not contain any real discrepancies. Mistakes can happen, so if you do notice that something seems incorrect, contact the credit bureau directly. Most good lenders will offer to review your credit report in detail, take them up on their offer.

Pay Your Bills on Time
Nearly 35% of your credit score is comprised of your payment history. It is essential to consistently pay any bills in a timely manner if you'd like to help improve your score. Though you may have had delinquencies in the past, those will begin to count less if you consistently pay on time.

Keep Your Card Balances Low
Canceling your credit cards may seem like the most beneficial thing you can do, but it's actually very important to maintain them and keep their balances low. Do not cancel your cards! Lenders generally want to see a large gap between your spending limit and the maximum amount on the card, so the most effective way you can improve your score is by reducing how much you owe. Those without credit cards tend to have lower credit scores than those who do.

Inquire About a "Goodwill Adjustment"
If you have proven yourself to be a good customer, ask your lender if they are able to erase a late payment from your report. It can't hurt to ask, especially if it's going to improve your record with the company. It happens less and less, but it still happens.

Understand the fundamentals:
Usually a longer credit history indicates a better credit score. The older credit cards should be used more often since they have a larger impact on your overall credit score. You have to use credit responsibly to build good credit. Realize that the credit score measures your ability to manage credit over time. You get points for managing it better, not owing more or less. There are many people that don't owe very much and have poor credit scores and on the flip side many people that pay $10,000 a month or more in monthly loan payments with 800 credit scores. The difference between the poor credit and the good credit is always in the way it is managed. That is why you get penalized for late payments; if you forgot to pay, who wants to lend money to someone who forgets to pay them back? or is always late? You also get penalized for having high balances in relation to credit limits. Again, who wants to lend money to somebody that is at the limit of what they can afford? These things count against you.

The idea behind the credit score is to give a lending institution a baseline to go off of because usually they don't know anything about the person they are trying to lend to. The credit score gives us something to start with. It is your way of making yourself presentable to lenders.

Requesting Your Score:
In 2004, the Federal Trade passed a law that allows you to be able to receive a free annual credit report from This website allows you to receive credit reports from three nationwide consumer credit reporting companies.
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