Pay Bills on Time
Ultimately, this is the easiest way to have a good credit score. By paying your bills on time, you avoid negative marks on your credit report, and over time, this shows you to be a credit worthy consumer. Being credit worthy is the first thing that lenders will look at, and therefore, you need to prove over the longer-term that you are able to navigate your finances in a responsible manner. If you are late paying bills, you could get reported to the major credit agencies, which will negatively impact your credit score.
Shop for Loans in a Short Amount of Time
If you find yourself looking for a home loan, credit card, or even a student loan, it makes more sense to do your inquiries, into availability and rates, in a very short amount of time. This is because every time you apply for credit, it can possibly cost you a few points on your score.
However, if lenders see that you have been applying in a very short amount of time, they can deduce that you are trying to get financed for a particular reason, and therefore, it doesn’t become a pattern. This is important; you don’t want to be seen as someone who borrows for any and every reason. Lenders understand that a prudent borrower will look for the best loan.
As a general rule, the FICO score, one of the most commonly used scores by lenders, ignores credit inquiries within the last 30 days as too recent to count against you. Obviously, if you are going to try to buy a home, you would make several inquiries over the course of a short amount of time.
Make Sure to Leave Your Old Debt on your Report
Some people are of the mistaken idea that leaving old debts that are paid on your credit report is a bad thing. As long as the debt was paid off in a timely manner, it helps improve your credit report, and of course, your credit score.
Leave the old debt on your credit report and any good accounts on it for as long as possible. This also includes leaving an open and old account if you have a consistent and reliable payment record. Quite frankly, if you have a good rapport with the creditor, closing the account does take away some of the positivity of that account being there.
Eliminate Credit Card Balances
The small balances that you have on various credit cards add up, and it’s actually better to charge small purchases on one card, instead of various different cards. This can boost your credit score, only charging the small bits and pieces on one account.
Roundup your various credit cards and pay off as many of the small balances as you can, and then use only one or two accounts for everyday purchases. You do not want to have a bunch of different balances on your credit report if you can avoid it.
Credit Card Balances
Speaking of cleaning up your credit card balances, the smaller amount of available revolving credit that you are using, the better off things will be for you.
The optimum range is near 30 percent. In other words, if you have $10,000 worth of credit on your credit card, never allow the balance to go above $3,000. If it is above that level, start paying it down to get it underneath that magic number.
Personal Loans and Credit Scores
Quite often, personal loans are used to consolidate existing debt. This can help your score over the longer-term, and by paying attention to the balances on your revolving credit, this is an important move you can make for improving your credit score.
Beyond being a responsible consumer, there isn’t much more to worry about as time is the biggest factor as to how your credit score looks. The longer you pay your debts on time, you will tend to have a better score, which leads to a lower interest rate on a personal loan, and quite frankly, anything else you borrow. By using a little bit of common sense and sometimes patience, you can move things in your favor.