It’s easy to accumulate credit and get behind on payments, declining your credit score in the process. The good news is, it is never too late to improve
your score! To improve your credit score you must first understand that credit scoring systems are complex and can differ from place to place, if one factor changes, your whole score may change. However, the general scoring models tend to consider the same information in your credit report to determine your credit score.
Think about these six questions to help you work on improving your credit score step-by-step.
- Have you paid your bills on time? Your payment history is a significant factor in your credit score. A great way to improve this is by
organizing all your bills and payments into one place, with the dates they are due. A tool to help with this is Community Bank’s Bill Pay. Bill Pay gives you the option to make all your payments from one location and with the bonus of only one password to remember. With Bill Pay, you can even set up recurring payments so you know your payment is made every month and on time.
- Are you maxed out? Most scoring systems will evaluate the amount of debt you have relative to your credit limits. If the amount you owe is close to your credit limit, it is likely to decrease your score. Work on slowly paying down the amount so you are not constantly at your limit.
- How long have you had credit? How long you have been building credit plays a small part in producing your credit score. Scoring companies want to see that you are reliable. This can take a great deal of time for them in order to get an accurate account. However, that being said, if you are just starting to build credit you have a fresh slate to work with. Be sure to make timely payments!
- Have you applied for new credit lately? If you have recently applied for several new accounts, your credit score could be negatively impacted. If you need credit, there is nothing wrong with opening a new account, but watch how many you open at a time and choose them to fit your actual needs. Scoring systems will look at your recently applied for credit by looking at the “inquiries” section on your credit report. However, not all inquiries are counted, such as reviews made by creditors monitoring your account.
- How many credit accounts do you have? Generally speaking, having an established credit account is considered a plus, but when you have too many it can become negative. Think about combining as many accounts as you can into one place. For example, if you have an account with a larger limit, pay off your other accounts with this one. Thus, eliminating multiple accounts, payments and interest.
- What kinds of accounts do you have? Scoring companies will sometimes consider what type of credit account you have. For example, if you apply for a mortgage loan, they will consider the amount of your down payment, total debt, income and other factors to decide the amount of this loan. Be aware of all factors, so that you can have a greater chance of getting the loan you need.
Improving your credit score may take some time, but it can be done. To improve your credit score just remember to focus on paying your bills on time, paying down outstanding balances and staying away from accumulating new debt.
Are you using credit wisely? Come back next week and learn how to use credit the smart way!