Having a good credit score is essential, especially for those looking to buy a home or car. A good credit score improvement can also help save money on interest rates and fees. But it’s important to remember that improving a credit score is a long-term process and can take months to see significant changes.
One of the biggest factors in your credit scores is payment history, which accounts for more than 35 percent of your FICO Scores. Making your payments on time is the quickest way to raise your scores. It’s also an important step, because late payments can stay on your credit report for up to seven years.
Another key factor is your credit utilization, which measures how much of your available credit you’re using at any given point in time. Lenders typically like to see a credit utilization rate of less than 30 percent. While lowering your credit utilization may require some work, it’s worth the effort because it can raise your scores significantly.
The best ways to improve your credit scores are to pay down debt and avoid new applications for credit. While having a mix of credit types, such as installment and revolving debt, can help improve your scores, it’s best to apply for credit sparingly to avoid bringing down your score. It’s also a good idea to keep older accounts open, even those with negative information, to show that you can manage credit responsibly over the long term.
Other steps to improve your credit include a thorough review of your credit reports from each of the three nationwide consumer reporting agencies, and disputing any errors that you find. A mistake on your credit report can lower your scores and affect your ability to qualify for loans and other financial products, so it’s well worth taking the time to check it regularly.
You can get a free credit report from each of the three major consumer reporting agencies at AnnualCreditReport.com.
Once you’ve reviewed your credit reports and fixed any errors, it’s a good idea to start focusing on the areas of your score that need improvement. For example, if your score is low because of a history of late payments, make sure you’re paying your bills on time going forward by setting up reminders in your calendar or by calling your credit card issuer to request a credit increase.