Tips to improve your credit score!

By now you’re probably aware that your credit score greatly influences the price you pay to borrow money. The lower the credit score, the greater the risk, the higher the interest rate. We won’t question the logic about charging individuals a higher rate that may already be financially tight, but we can show you some tips that will help improve that score and maybe save you a few bucks on your next loan or credit card.

It’s very important to understand that your credit score is not going to jump over night. I highly recommend signing up for a reasonably priced credit monitoring service. Be cautious of the overly priced ones that offer all three credit bureaus at a lavish cost. Typical rates of these will be around $5 – $20 per month – but it’s worth it. Improving your credit is a lot like losing weight – you have to have discipline, control, and patience to be successful. You also need to monitor your progress (just like you’d hop on a scale) to see how it’s going.

Here’s some quick tips to help you improve that FICO score:

Get a recent copy of your credit report! – It’s important to understand what is showing up on your credit report before you start down this path. You may see an opportunity for some quick wins by correcting inaccuracies on your report. The information on your report is what drives your credit score. So if your report is inaccurate – then so is your score. You can request a free copy from each agency annually from all three credit bureaus.

Lower the amount of debt you owe – This is probably one of the most difficult things to do. Let’s face it, we’re in a recession, unemployment is high and money is tight with everyone. But if you want to improve your credit score you need to start now! Start paying down those credit cards with every extra penny that you save up. Stop using your credit cards! Every time you make a purchase think of it this way, is this a purchase that you’re willing to live with for the next 5 years, 10 years, 20 years? If you’re only paying the minimum payment on your credit cards it may take that long to pay them down! If you’re having problems in repayment – consider debt consolidation or debt counseling. There are great tools that can help you create a debt management plan to get you out of debt quicker.

Consider applying for less credit – Every hard inquiry in your credit costs you points. They scale as you begin to increase into too many inquiries over a period of time. Lenders see this as the person is in financial trouble and needs more credit to stay afloat. When you apply for credit – is that a decision that you’re willing to take a hit on for 2 years??? This does not include checking your own credit.

Pay your bills on time! – This seems like a no-brainer but for someone new to credit they may not understand the impacts of paying at the least the minimum payment when it’s due. A 30-day+ late payment will show up negatively on your report and greatly impact your score. Next time you throw that credit card statement in the bill pile – think about this.

Patience - I can’t stress this enough, it’s not going to happen over night (unless you hit lotto?) but you can make great strides in improving your credit following these steps. It will help you save money and avoid financial problems in the long run.

All in all fixing your credit score isn’t easy – but if you don’t fix it now it will haunt you forever. It requires discipline on following some simple guidelines and you’ll be much happier in the long run. The door to financial freedom is there – you just need to walk through it.