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Smart Ways to Improve Your Credit Score

By Ruth Racey
Published: Sunday, September 20th, 2009

In order to improve your credit score, it is important to understand how credit bureaus calculate your rating. The three digit credit score can range from 300 to 850 and your aim should be to get a score of at least 750 or higher. Keep in mind that the FICO scoring system is based on 5 different categories. In achieving a higher score, you need to be in good standing in each of those categories.

Payment history can affect credit scores since it makes up 35% of the FICO scoring system. Obviously, how prompt you are in paying the bills can really improve the final rating. As much as possible, make it a point to submit payments ahead of time instead of waiting for the last day of payment. By doing so, you can reduce the risk of falling behind with payments.

If you currently have a low credit score, you may need to wait for some time to completely recover. It can take at least six months or longer to get a good credit rating depending on how low your current rating is. Nevertheless, if you continue to be on time when paying bills, you should be able to enjoy good or excellent credit rating once again. Just be patient and be consistent with what you have started. Keep using your accounts with utmost care and keep submitting payments on time.

If applicable, applying for a new loan can help in improving your personal credit. How? The types of accounts you have is one of the factors considered in a FICO scoring model. Therefore, it is good to have different types of accounts in your name because it shows your capability to manage different types of debt. Instead of applying for too many credit cards from various issuers to boost your score, consider getting a personal loan or a car loan instead.

Having a mortgage loan in your credit report can also be an impressive thing for lenders because a home is considered to be a very good investment. Yes, having a mortgage loan under your name can boost your credit score provided that you can submit monthly loan payments on time. Different insurance policies to secure your home, car, or health are also recommended to boost your rating.

Ideally, you will want to check your credit report at least twice a year to make sure that you are making improvements. Remember, in case you find errors in your report, immediately request for corrections by sending a dispute letter to the credit reporting agency that issued your chart.

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