If you’re planning a big purchase and hoping to get the best interest rate and terms on it, it is always a good idea to check your credit score first. When you check credit report, you will know if there’s any errors that require you to dispute and improve your credit score. Although this is a simple action, it can help you increase your score, obtain lower interest rates and better terms and deals on just about most of your big purchase from preferred credit cards, a new auto loan, insurance to a home mortgage.
In spite of the importance of credit scores, it seems people don’t pay attention to it until the last minute. To avoid the last-minute surprise, here are the 6 tips for improving credit score:
1. The correct way to check your credit score
To prevent a ding on your credit report, the safest place to request for the report is to go to MyFico site or the 3 credit bureaus; they are TransUnion, Equifax and Experian.
2. Avoid doing balance transfer or credit card debt consolidation
If you want to improve your credit score, keeping your balance to credit limit ratio low is one of the keys to higher scores. Instead of doing balance transfer and consolidate all the debts into one card account, you will be better off paying down each card and see your scores gradually increase.
3. Don’t close your old accounts
Because the credit scores are in part calculated based on the ratio between your total debt and the total credit limit you have. The lower the ratio is, the better your score will be.
Instead of closing your unused old accounts, just leave them “as is”. However, if you really have to close these old accounts, choose to close these newer accounts, even if these newer accounts have lower interest rates or great incentives. The reason being that is you can keep the older accounts history, which plays an important factor in raising your score.
4. Forget about the in-store credit cards
For every retailer’s charge card you apply for, you can expect to see your score dropping 10 to 20 points. And every time you add a new account to your report, you lower your average credit history, which is definitely not worth doing so.
5. Pay down your credit card debt
Try to pay as much debt down as possible. Set a goal and maintain your credit card balance to below 30% of the card limit. It will not only help you increase score, but also prevent you from getting into too much debt.
6. Dispute credit report
Check your credit report for any errors on the regular basis. As soon as you find an error, you need to dispute it right away. Once you get it fixed, the next thing you should do is to ask the credit agencies to bring your report up to date.
Improving credit score is not that difficult. It does take some of your time and you do need to work on it in order to increase the score and enjoy the financial benefit.