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Improving Your Credit Score: It is not a Herculean Task

By Janet Lacey
Published: Sunday, September 20th, 2009

Your credit score is your report card, in other words it is a record of your financial stability. Your kid strives for good grades in school and you’ve got to strive for better credit scores out in the real world. And let’s face it; the world is about numbers you can’t escape that. The faster you understand the system the better. What are the steps one can take to improve one’s credit score?

Payment History

Pay your bills on time. And if you have any debts accrued, make sure you pay them away. The longer you stay in debt, the worse your score gets. It’s also important to be aware that if you pay off a collection debt, it’s not going to be wiped off your record. It will stay there for up to seven years. It’s a permanent black mark on your financial stability record.

Amounts owed

Make sure that your credit card usage is as low as possible, At least for a few months before filing for a loan. You can use say 10% of your credit limit. This is a bit tough considering the points that one can accrue by using ones credit card, but it makes sense when you want a loan. And don’t go about closing all your unused credit cards as a short term strategy. And also make sure you don’t go about adding more credit cards to your wallet with the intention of having more credit limit. This will also lower your credit score.

Length of credit history

Now a portion of the score is based on the age of your account, the older the better. Hence it is not prudent to suddenly go about opening a lot of new accounts as the average age of your accounts will reduce.

Taking up new credit

Open new accounts with the knowledge that you have to pay them off in time. This will ensure that there is no defaulting on payment. And it okay for you to request for your credit report, as long as it’s from an authorized agency. This won’t affect your credit score.

Credit use

As mentioned earlier, do not go about opening accounts just to have a good credit mix. And don’t go about closing all your credit cards either, because a person who has no credit cards is put under a higher risk bracket than a person who has managed his credit cards well. and don’t go about closing random accounts. This will also show up on your credit report.

That’s about the various things one can do to improve one’s credit score. But in the long run, it’s not about consciously going about following those tips. It’s more about making it a way of life. Being careful with money is supposed to be an inborn trait. Getting loans for everything one consumes is a very stupid thing to do. If you really have to get a loan for buying something, you must really consider whether you actually need it in the first place.

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