How to Improve Your Credit Rating

Without a good credit rating, reaching your goals will be extremely difficult. If your credit score has dropped lately due to outstanding debt issues or other factors, it’s time to break bad habits and create new ones.

Instructions

Difficulty: Moderate

Things You’ll Need:

• Discipline
• Better spending habits
• Less Credit Cards

1. If you own multiple credit cards, you'll have some major organizing to do. The first step is to know where you stand with your credit cards. You should be able to know exactly how many open accounts you have through credit cards and what the balances are.
2. The major credit bureaus base a person’s credit rating on how much they have in balances compared to how much the credit limit is. If all of your balances are close to or over your set limit that will damage your credit score. Begin paying down high balances immediately.
3. Too many inquiries into your credit within a short amount of time is one quick way for your score to drop. Limit the number of credit cards you have and how often you apply for new credit. Each time you apply for a line of credit, it has to be checked. Each time this happens, it is noted in your credit history. If you’ve had one too many credit checks in a short amount of time, your score will drop.
4. Allowing the company to cancel your zero balance credit cards actually boosts your score. If you have a zero balance on a credit card account and do not plan to use it in the future, do not cancel the account. Simply cut up the card or put it away and allow the company to close it.
5. The most obvious step to take is to make sure you make your payments on time, every time. If possible, pay more than the minimum balance. For small purchases, pay back the entire amount in full when possible. These types of practices will have your credit rating up in no time.

Tips & Warnings

• If you’ve been following all of these practices and then some, but still don’t see a huge improvement in your credit rating, it may be because your accounts haven’t been opened long enough.
• The older your credit accounts are, the better your score will be because this shows creditors that you’ve managed to maintain a good standing account for many years. The best accounts in the eyes of the credit bureaus are those that are over five years old.
• While trying to build back up your credit rating, rely on debit more than credit until you can effectively pay down any high balances on your credit card accounts.