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The importance of a good credit score in modern life cannot be overstated. From buying a house or renting an apartment to getting car insurance and being hired for a job, many facets of daily life are dependent on a person’s credit score. While there are many different factors that go into the determination of a credit score, there are a few simple things that a person can do to boost his or her credit score.

Check Current Credit Report

When a person sets out to improve his or her credit score, obtaining a copy of the report is an important first step. A person can get a free copy of the report by visiting annualcreditreport.com. After obtaining the report, a person should carefully examine the report for errors. Common errors include information for people with similar names, information from former spouses, old information that should no longer be showing on the report, duplicate reports on the same debt and incorrect closure codes. If errors are found, the errors should be reported to the reporting bureau using their requested reporting process. It may take some time for the incorrect information to be corrected.

Pay Bills

The simplest thing a person can do to build his or her credit is to pay bills on time. Whether it is a rent payment, doctor bill or credit card payment, every payment that is made on time is a positive event in regards to a person’s credit score. Though every payment may not be reported to the credit bureaus, every timely payment prevents collection actions which will almost certainly end up on a person’s credit report. Payments made on existing credit accounts will also lower the balance on the account, decreasing the debt to credit ration, which is looked upon favorably by the credit reporting bureaus.

Manage Credit Carefully

Whether a person is preparing for a large purchase or simply trying to maintain his or her existing credit score, it is important to take purposeful steps to manage a credit history. For example, while it may be tempting to close old accounts that are no longer used, old accounts are very helpful for building good credit. Credit score formulas even reward people for having old credit accounts. Open accounts with no balance also help to lower a person’s debt to credit ratio. In addition to making sound decisions with old accounts, a consumer needs to carefully open new accounts. The creation of a new account will not necessarily harm a person’s credit score, but it might. New accounts lower the average age of a person’s credit accounts and increase total available credit. Both newer accounts and more credit are seen as risky factors by the credit bureau’s and may result in a person receiving a lower credit score.

Though past credit mistakes cannot be made up for overnight, taking action to improve one’s credit score will result in a small increases over time. Knowing how to manage credit and taking the proper steps to keep a good score can help a person to live a better financial life in the years to come.