By: Arthur Cooper
Submitted: 2010-10-18 14:04:48 | Word Count: 664
In these trying financial times, it is often asked: “How do I improve my credit score?” The answer is simple AND complicated. Your credit score is a crucial number, used by finance companies and banks to determine (along with other information) whether or not you are a good credit risk. A poor credit score is an indicator that you might not pay back your loan on time or at all, and they are not necessarily in the business of giving money away for nothing.
To start with, it is a free process to get your credit reports and dispute any errors, a process that can help you raise your credit score by fixing any existing errors on your credit reports, thereby raising your credit score. This process can take months or a year or so to complete to get any errors fixed, but at the end of that process, you’ll at least have raised your credit score, sometimes substantially. Sites like CreditElves.com can help you with good advice and form letters you can use to get any erroneous items on your credit reports taken off, or at least get the dispute process rolling.
Another thing to know when you are trying to improve your credit score is how your credit is rated. It is divided into five categories, including payment history (35%); total amount owed (30%); length of credit history (15%); new credit (10%); and type of credit in use (10%). The most important factor to any creditor is whether or not you make your payments on time. Payments thirty or more days past due will appear on your credit report as a negative, and will bring down your overall score. As a rule, negative items stay on your credit report for seven years (except bankruptcies, which stay on for ten).
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Your total debt is an important number to keep under control as well. If banks or lending institutions see you as overextended (for instance, making too little per month to pay for what you have already been loaned), they will see no way for you to pay them back the amount you are requesting, and will turn you down. So get some of the items on your list paid off, or paid down, before applying for your credit reports or attempting to secure a loan.
You may have to make some major life changes in order to improve your credit score. Consider paying off and cutting up some of your credit cards, and reducing their number to one. Make it the one with the lowest interest rate, and use it only for emergency purchases. Don’t establish any new lines of credit until you get your debt load under control, and try applying more than the requested amounts on credit lines until they are paid off. This will reduce the interest paid over the life of the loan, and shorten the time needed to get it off your credit report completely.
Keep at it, and a good credit score is within your reach.
