Improve Your Credit Score The Right Way

If you have been following the economic news over the past year then you know that banks have tightened up their lending practices. Thus making it harder and sometimes impossible for many people to gain access to credit they need to make major purchases such as homes and cars. By knowing the steps you need to take to improve your credit score the right way you will be able to once again access the credit you need.

Make sure to get a copy of your credit report to know where you currently stand. Many banks are requiring a score of 720 to make housing and auto loans. Knowing what your score is will help you make the changes needed to improve. A higher credit score can add up to thousands of dollars in savings over the course of your loan. Having your score will help you establish a plan for improvement. Be sure to check your report for any errors and work to clear those up quickly.

Pay your monthly bills on time! This is one of the most important ways to help bring up your credit score. Paying a debt even just a few days late can have a negative impact on your score. Set up automatic bill pay at your bank to make the payment a few days before the due date to ensure the payment will not be late. You will be surprised to see in a short time the improvement in your FICO score by paying on time each month.
Make sure any delinquent accounts are the first to be caught up. Having delinquent accounts each month will negatively affect your FICO score. Get these current and keep them that way.
Pay down the amount of debt you have by paying extra each money. You will want to lower your debt to income ratio to improve your credit score. Look for ways to lower your monthly spending and apply that money in the form of extra payments on your credit cards and loans. Try to find ways to increase your income. A part time second job, internet auction sites to sell items, freelance work on the internet, cleaning or lawn care are just a few ways to bring in some extra money. This doesn't need to be permanent but if you have a financial goal you are trying to achieve and working on paying down your debt, finding some extra income is a great way to help.
Don't use your credit cards. If you are carrying high balances, put the cards on ice. Save them for emergencies only such as car or home repairs. Working to improve your credit score involves using your credit wisely. It's best to keep your revolving credit balances well below the limits. A good way to keep up good credit is to use your credit card for groceries or gas but be vigilant about paying the balance in full each month. Try not to carry a balance at all or keep it as low as possible.
Don't close unused credit accounts, keep them open. You may be surprised but closing accounts can actually have a negative affect on your FICO score. Don't open more revolving credit accounts. Your goal is to pay down debt and improve your credit score. Opening new accounts will only be more tempting to spend and can even have a negative affect on your credit score.