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6 tips to improve credit scores

Here are 6 tips to improve credit scores or your FICO score. Good credit must be earned and takes time. If you have no credit, it’s no easy task to prove to lenders that you are trustworthy and financially responsible enough to pay your bills in a timely manner. If you have no credit someone will likely take a chance on you because of your future earning potential, but lousy credit is a lot worse! Credit scores are three-digit numbers lenders use to gauge your creditworthiness. After the financial crisis hit, a higher FICO credit score is needed to get the best loan terms. Lenders typically expect scores of 740 or higher for the best mortgage rates. Lower scores mean higher rates or perhaps no loans at all.

Having a low credit score can also hurt you in other ways:

  • Insurance companies use it  to evaluate and set premiums.
  • Employers can judge a potential employee on how responsible they are based on their score.
  • Landlords often use scores to determine whom they rent to.

Having poor credit can happen for a number of reasons and is sometimes unfairly judged. You may have paid your debts on time and responsibly for a long period of time and then faced a sudden pitfall such as the recession. Not paying your debts will certainly cause your credit score to plummet.

Here are some tips for building a better credit score:

1. Pay your bills on time! No really. This is a first step and a must!

2. Make a monthly budget and stick to it! You must track where you spend money to be able to budget it responsibly.

3. Get a copy of your credit score and check it for errors. You can’t improve it unless you know what you need to work on.  Also, be sure to check it for mistakes, as they do happen. You can get a free report once a year from Annual Credit

4. Don’t close unused cards. Closing a card that you are not using will affect your debt to credit ratio. The more credit you have available with the least amount of debt increases your credit score.

5. Don’t apply for a bunch of new cards . Opening new cards all the time will actually hurt your credit score.

6. Keep your balances low. A debt-to-credit ratio of 20% to 25% of the available credit per card is considered ideal by lenders.


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