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How To Improve Your Credit Score

improve credit scoreIn the United States, tens of millions of people struggle to obtain loans and credit cards with reasonable terms due to their low credit scores. A low credit score (typically anything under 620) may cost you money, and can prevent you from securing an apartment or even a job.

If you have had difficulty keeping up with your bills, your credit score has likely suffered. You may be wondering what you can do to repair the damage. This post will discuss some of the steps you can take to bring up your credit score.

It is important to understand that there is no magic remedy for raising your credit score. Improving your credit score is a bit like losing weight: it takes time, and there is no quick fix.

Here are five ways you can improve your credit score:

1. If you don’t have a credit card, get one.

You can build your credit score by having and using one or two credit cards. While it is not necessary to “carry a balance” to have a good credit score, having a card can add points to your score.

If you are unable to qualify for a regular credit card, you may want to apply for a secured credit card. Typically, the issuing bank will give you a credit line equal to the deposit you make. A secured credit card that reports to all three credit bureaus (Equifax, Experian, and TransUnion) will give you the best chance of improving your credit score.

2. Use an old card.

In general, the older your credit history is, the better your score. But if you have stopped using your oldest credit accounts, the issuers may close the accounts or stop updating them to the credit bureaus. Even though the accounts may still appear on your report, they won’t be given as much weight in calculating your credit score as newer, more active accounts.

If you have an older, little-used credit account, you may want to consider using it for some small expenses. You can always pay off the balance in full – and this will help your score, too.

3. Check your credit report for inaccuracies.

You should review your credit report carefully and check it for any inaccuracies. Most credit card issuers and other lenders are willing to update this information for you if you ask them to.

If a lender shows a lower credit limit than you actually have, this may artificially depress your credit score. Verify all of the balances that appear on your report.

You should also dispute negative information on your credit report that was improperly reported.

4. Pay your bills on time.

It is critical to pay your bills on time. If you have failed to make timely payments in the past, you can improve your score by paying on time.

You should set up payment reminders to help you do this. You may also want to consider setting up automatic payments through your checking account.

If you are a longtime customer of a lending institution and have only one late payment on your credit report, you may want to call the lender to see if they would be willing to remove the late payment from your report.

5. Add an installment loan.

If you can show that you are responsible with both major kinds of credit, you will see an improvement in your credit score. If you already have revolving accounts (such as credit cards), consider adding an installment loan (such as a personal loan, auto loan, mortgage, or student loan) to the mix.

You want to make sure that the loan will be reported to all three credit bureaus. Consider applying for installment loans at community banks or credit unions.

Image courtesy of Flickr user 401(K) 2013 pursuant to a Creative Commons CC BY-SA 2.0 license

About the Author
Christian Spaulding is the founder and principal attorney at Spaulding Law Group. Mr. Spaulding has lived in Southern California his entire life and his family has been in Southern California since the late 1800’s. Mr. Spaulding received his undergraduate degree from Chapman University in Orange with a Bachelor of Science in Accounting. While completing his undergraduate studies, Mr. Spaulding was the recipient of the prestigious Wall Street Journal Student Business Award. Mr. Spaulding graduated at the top of his accounting program at Chapman University and attended law school at Chapman University School of Law where he was a Merit Scholarship recipient. Mr. Spaulding has focused his firm’s practice solely on consumer protection and bankruptcy since 2009.

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