How to Improve Your Credit Score

Having a good credit score is very important. It is through this credit score that lenders would approve or disapprove your application for a car purchase, a home mortgage or other types of loans. If you have a low credit score, it is either you’ll get disapproved or you’ll get approved but at a higher interest rate. To get you through this, you need to find ways on how to improve your credit score.

Getting increases to your credit score usually take time and a lot of effort. The best ways to fix your credit score is by paying debt and by successfully disputing the negative information on your credit report. There are actually five areas in a credit report that the credit scoring software looks into. This includes the following: the types of credits used, the amounts owed, your payment history, the length of credit history and your new line of credit.

Here are the best ways on how to improve your credit score:

1. Ask for a copy of your credit reports.
You can’t start working on improving your credit score if you don’t know what you need to focus on. Ask for a copy of your credit report from the three major credit bureaus. When you get a copy of your credit report, you will find a list of accounts hurting your credit score.

2. Dispute errors in your credit report.
When you check your credit reports and see that there are errors, you need to have these removed. You can write a letter to the creditor or credit bureau who listed the account. Take note that these errors can definitely hurt your credit score.

3. Settle your past due balances.
Take note that almost 35% of your credit score is comprised of your payment history. This means, the further behind you are in terms of payments, the more it is affecting your credit score. It is best to settle your balances when you have the money. Once your debt is sent to a collection agency or charged off, you’ll get caught up on higher payments. It is better to talk to your loan issuer about the missed payments and they are usually willing to re-age accounts. This way, you credit report would show that you always pay on time.

4. Avoid new credit card applications.
If you think you are fixing your finances by getting a new credit card application, think again. When you’re in credit repair mode, making new applications for credit can hurt your credit score even more. It also lowers your average credit age which again, affects your credit score.

5. Talk to your creditors.
Yes, they may be the last people on Earth that you want to talk to but they are the best people to help you with your credit difficulties. Talk to them about your situation. They usually have temporary hardship programs which can help reduce your monthly payments.

Alex is a journalist and blogger. He writes on everything from finance to design and writes a consumer blog for Coupon Croc .