Helpful Tips to Repair your Credit

Improving and maintaining a good credit score is important for anyone who wants to participate in our financial system. A person’s credit score can be used to determine if you are eligible to take out a mortgage or if you are the right person for an open job position. Unfortunately, very few people understand exactly how their credit score is determined. The key to improving your credit rating is to understand how your credit score is determined. Each of these tips helps to improve at least one key aspect of the credit score formula.    

The most common and easiest to follow advice given to persons who want to improve their credit score is to make sure that all of your bills are paid on time.  While paying your bills on time can help you to improve your credit score, it can typically improve a score by twenty points or less.

Fortunately, one of the easiest and fastest ways to improve your credit score is to open a new credit card. This is because the ratio of credit extended to the amount a consumer owes can account for about one third of a credit score. In other words, the more credit you have extended to you, the higher your credit score; provided that you are actually using very little of the credit. 

Credit cards are almost always issued with a credit limit and customers are allowed to make charges up to this limit. When a customer charges up to this limit, then his or her credit extended to credit used ratio equals one. By applying for and receiving credit cards, but being careful to not put any charges on them,  you could improve your credit extended to credit used ratio; this in turn, improves your credit score. 

In addition to taking out new cards, you can also ask your current credit card company to increase your credit limits on your current cards. Doubling a person’s total credit limit can increase your credit score by about thirty to sixty points.

Starting a new credit card account can also help you establish your own credit history. This is especially helpful for younger consumers whose credit scores are most likely low because of a short length of credit history. Length of credit history or the amount of time that you have used credit, can account for about ten to twenty percent of a credit score. While many young consumers will not be ready to take out a mortgage or other large loan for several years, having and occasionally using a small credit card will help them to establish a credit history that can improve their credit score later.

If you have an extremely low credit score however, you will probably have problems getting a new credit card or having your credit limit extended. In this case, you will need to focus on other ways to improve your credit score before trying to improve your credit extended to credit used ratio. If you think you are in this situation, start by getting a recent copy of your credit report. Then, read through the report and look for any errors. Remember that nearly eighty percent of all credit reports have mistakes in them. Correcting a mistake or having incorrect information removed from a credit report can improve your credit score significantly.