How to Increase a Credit Score

In today's credit driven society it is important to maintain a good credit history. Real life though sometimes intrudes and many of us find ourselves with a less than desired credit score. But you do not have to accept a lower credit score. There are several ways in which you can increase a credit score to make yourself more desirable both for future lenders and employers. With a solid plan that involves these steps, an increase in credit score becomes a very realistic goal.

Instructions

1. Pay more than your minimum due on credit accounts. Beyond the interest charges (sometimes as high as 2 percent), paying only the minimum means you may spend several years paying off a credit card with a $5,000 balance even if you never make another purchase. Also, credit lenders view minimum payments as an indication that you are unable to afford your current debt load. Whenever possible try to pay off your cards each month or at least pay twice your minimum.

2. Reduce the number of inquiries. Each time you apply for a loan, a credit card or even a bank account, an inquiry is made and noted in your credit history. Inquiries also occur when current creditors note late payments. Too many inquiries may be an indication to future creditors that you are either overextended or simply a bad credit risk. Apply for additional credit judiciously and make your payments on time to avoid too many inquiries on your credit report.

3. Calculate your debt-to-income ratio. Add up all of your fixed debts, payments and credit card obligations and divide the total by your gross monthly income. Typically, a ratio above 36 percent is considered a high risk by most credit lenders.

4. Decrease your debt-to-income ratio. Creditors also evaluate your credit worthiness by determining your debt-to-income ratio. This is an important calculation that is used by mortgage companies, especially for first-time home buyers. A high debt-to-income ratio will either disqualify a potential buyer, or force a buyer into a higher percentage rate loan.

5. Pay on time. While it is great if you can afford to pay above the minimum each due on your credit cards, if you can't, be sure to pay on time. All late payments are noted by your creditors and reported to the three main reporting agencies, Trans-Union, Experian and Equifax. Late payments are considered "derogatory" items on your credit report and will impact your overall credit score and credit worthiness and likely force you into a higher interest rate, high-risk credit profile.

6. Monitor your credit reports. There are three reporting agencies that generate reports to potential creditors regarding your credit history. You should frequently check these reports to ensure that all information is accurate and that there are no errors or fraudulent activity. You can get a free credit report at AnnualCreditReport.com.