How to improve your credit score?

There are several ways on how you can improve your credit score. First of all you should know what your current credit score is so that you can make the improvements you will benefit from most and do not waste your time on things that won’t really help you. You should pull a credit report from each of the 3 major credit bureaus. Make sure that the report includes the credit scores as well. Please note that the normal free annual credit report does NOT provide this option. You are better off with 3rd party providers like GoFreeCredit.com as they provide you with free access to credit report and credit score and optional credit report monitoring and convenient email alerts if something on your report changes.

 

Once you have your credit reports and credit scores you will need to determine where your score falls into the mix. Do you have good credit or perfect credit or is more on the lower side of the scale? How far away from the next level are you? The last question is the most important question to ask as it determines what your next step should be. If you are just a few points away from the next level up, smaller changes will be sufficient to move you into the better scoring. If you are at the bottom of one range you will need to work much harder to achieve the same goal. In those cases you should skip the smaller steps in the cleanup process and rather tackle the big problems first.

 

Smaller cleanup steps are:

 

  • Remove wrong personal data
  • Remove closed accounts that still show up
  • Remove wrongfully reported data
  • Close accounts you do not use anymore and make sure that change gets reported back
  • Downgrade credit lines to reduce the amount of available credit

 

Bigger cleanup steps are:

 

  • Pay off existing loans
  • Consolidate credit cards
  • Close credit card accounts
  • Make a lump sum payment onto an existing loan to reduce the balance (this is not a payoff – just reduce the amount you owe significantly)
  • Apply for a new loan or credit card (to build up credit history – use secured credit cards as needed)

 

If you follow these steps and show financial discipline your chances of improving your credit score are significant.