Improving Your Credit Score

By Andrea Eldert

A picture may be worth a thousand words, but sometimes a number can be even more powerful.  For major league baseball players, it’s batting average.  For geniuses, it’s IQ.  And for consumers, it’s credit score.  This number not only describes you as a consumer, telling in a snapshot how well you’ve handled credit in the past, but it also defines you.  If you are seeking a mortgage or another loan, it can influence how much money you are eligible to borrow and what rate you might receive.  With this kind of influence, it is not surprising that consumers are often interested in the ways that they can raise their credit scores and put themselves in a good position to borrow.  Here are 6 ways you can improve your credit score.

1.  Check and Correct Your Report

The first step in raising your credit score is to find out what your credit score is and what may be contributing to that score.  Anyone can request a free credit report for themselves once every year.  Doing this allows consumers to make sure that the report is accurate.  Sometimes mistakes are made, and it is important to get these inaccuracies corrected as soon as possible.

2. Pay Your Bills On Time

It is simple and straightforward advice, but it really does go a long way toward keeping your credit score high or raising it if you’d like it higher.  Late payments to any loan, mortgage, utility, or credit card can result in the lowering of your credit score.

3. Use Your Credit Cards Wisely

The way you use your credit cards can have a significant impact on your credit score, either positively or negatively.  One factor affecting your credit score is your credit utilization rate, which is the percentage of available credit that you are actually using at a given time.  If this rate gets too high, then your score will suffer.

4. Don’t Open Too Many Accounts At Once

Opening each account will trigger an inquiry of your credit history, and too many of these requests in a short period of time will reflect negatively on your perceived credit worthiness.  Having your credit portfolio weighted more toward new accounts will also be counted as a negative.

5. Limit Credit Inquiries

As mentioned in #4, having a lot of inquiries into your credit can have a negative impact on your credit score.  You have to give permission for these inquiries so you’ll want to minimize the number of them in a short time period.  The exception to this rule is in the case of looking for a mortgage or other loan at multiple institutions.  Credit bureaus will not count multiple inquiries for a single reason against you.

6. Avoid Negative Events on Your Report

There are some events that can really harm your credit score and continue to harm it for a long time.  One of these events is having an account turned over to a collections agency.  This is a big deal even if the amount is small.  Try to deal with your debts as quickly as possible.  If you can’t pay in full, often creditors are willing to work with you if you will be upfront with them and pay what you can.  Another huge event is bankruptcy, which is something you want to avoid at all costs.  A bankruptcy will not only destroy your credit score, but it will remain on your record for up to 10 years.

Improving your credit score takes time so be patient.  But consistently following these steps can get you on your way.  At Federated Bank, we understand that it may take some time.  Fortunately, if you want to get a mortgage, we offer some options that have more flexible credit score standards.  Come in and talk with me about our offerings.