Your credit score is very important, especially when it comes to getting a mortgage or purchasing a car. Your credit scores help lenders determine whether you can repay a loan based on your past financial performance. A higher score can qualify you for better interest rates, higher credit limits, and more types of credit than you would with a lower score. Your credit score is determined by many aspects. Check out below the five major areas effecting your credit score and the different ways your can improve your credit score!
Five major areas effecting the score:
- Payment History – This is your payment history.
- Total Debt – This could be how much overall debt you have or how close you are to your credit limits.
- Length of Credit History – The longer your credit history is, the better.
- New Credit – This is determined by how much new credit you tried to get recently
- Types of Credit Established – Do you have a healthy mix of revolving (credit cards) and installment (loan) credit?
Ways to improve your credit score:
- Pay your bills on time
- Keep credit card balance low
- Check your credit report for accuracy
- Pay down debt
- Don’t open multiple accounts too quickly
- Don’t close an account to remove it from your record
- Contact your creditors or see a legitimate credit counselor if you’re having financial difficulties
- Pay more than the minimum due
It takes time to build a strong credit profile, but these tips can lead you into the right direction and have you closer to receiving better interest rates!
Remember, you can purchase your credit score for a fee from the credit bureaus. You can also request it (for a small fee) when you get your free credit report at annualcreditreport.com.