The Importance of Improving Your Credit Score

“If people can get loans and deals even with bad credit, then why improve it?”

This is a common misconception among many people who think that if they can get by even with bad credit, then why bother fixing or improving it at all?

The truth about it is, the reason companies approve loans and credit cards even for people with bad credit history is that these companies earn more that way. You’d be allowed to get those loans and credit cards, but you pay the price: higher interest rates.

Did you know that the current average credit score is 720? That’s not bad, considering that as a rule, anything below 600 gives people with bad credit the risk of paying interest rates higher than those with better credit scores.

Basically, these are the factors you’d need to consider to improve your credit score:
1.    payment history
2.    total debt owed
3.    length of credit history
4.    types of credit used
5.    new credit

Now don’t be bothered if you found out that you have bad credit—it can be fixed. It may take months or even years, but it can be fixed. The best thing you can do is to always pay your bills on time and keep your balances as low as possible. But what if the damage has been done (you weren’t too careful in the past)?

Fortunately, there are other steps you can take to fix (or at least improve) your credit score:

First, get a copy of your credit reports from all three major credit bureaus (Trans Union, Equifax and Experian). You can get these at absolutely no cost, either by asking one from those three or by going online and visiting any of the free credit report sites. Every individual is entitled to one free credit report from them each year.

Second, learn to budget. Knowing your credit score will at least give you an idea of how much you should spend and how much should be put into paying off your bills. A good tip is to pay off those with higher interest first because you’ll end up saving money compared to paying the same amount on two or more lower interest cards, loans or bills.

And third, a change in your shopping habits is mandatory. More often than not, impulse buying (or unplanned shopping) is what causes people to go into debt in the first place.

Just keep these tips in mind and always be aware of your purchases, and you’ll find that your credit has gone from terrible to really good in no time.

You may already know credit score basics, and how your score is used to help determine if you can get approved for a loan and which interest rates you qualify for. However, do you know it also affects your ability to get housing, insurance, and even your credibility with employers? Your credit score affects many aspects of your life, so its important to have a clear understanding of how it works. Learning the five main components of your score is a good first step. •Payment history is based on your bill payment history over time. This includes but is not limited to credit card, mortgage, and utility payments. Keep your credit score in good standing by making consistent, on-time payments. •Amount owed is determined by the amount of debt you owe versus the total amount of credit you have. The reality is, if you use more than 50 percent of your credit limit, you will likely see your score drop. •Length of credit history demonstrates your financial stability and the ability to manage credit responsibly. Keeping credit accounts open for at least two years will positively affect your score. Length of credit history can also play a role if you are trying to reduce your number of accounts. •New credit looks at the number of accounts youve opened recently, as well as your proportion of new accounts to older, established accounts. Also considered are the number of recent credit inquiries that have been made for your report. •Types of credit examines your current mix of debts, which …
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