How to Get the Best Possible Credit Rating

Although having a good credit rating always has been important, it has become even more vital as lenders tighten credit and raise lending standards. Having a good credit rating means you will be approved more easily for things like credit cards, auto loans and a mortgage. That can save you money in the long run, because lenders will give you lower interest rates on your loans. Therefore, you should do everything you can to get the best possible credit rating.

Instructions

1

Get your credit reports. By law, you're entitled to a free credit report each year from each of the three credit reporting agencies; you can get all three from www.annualcreditreport.com. These reports won't give you your credit score, however; for that, you have to pay a small fee.

2

Check your reports. The reports say what accounts you have open, when they were opened, how much you've paid, if the payments were late, when the accounts were closed, and who requested your reports and when. If you notice any discrepancies or anything strange, report that immediately to the credit reporting bureau.

3

Pay down your debt. A big part of your credit rating is based on your overall debt load and your debt-to-credit ratio, or the amount of debt you have as a percentage of the amount of credit you have available. You can improve both those by paying down your debt. Generally, paying down credit cards will improve your score more than paying off an installment loan, such as an auto loan, student loan or mortgage.

4

Keep using your oldest credit cards. An important factor in determining your credit score is how long you've had the accounts--the longer, the better. If you don't use an account, the credit bureaus will stop updating that card; if that happens with your oldest cards, it could make your credit history look shorter than it actually is.

5

Be cautious about opening new credit accounts. It can be tempting to apply for a new credit card, because of discounts or rewards you might get. But each time you apply for credit, whether it is a credit card or a loan, the credit bureaus record the credit check made by the lender. Multiple requests, especially in a short period of time, can act as a red flag to lenders.

6

Pay your bills on time, and preferably pay more than the minimum payment. Late payments have a negative impact on your credit rating. In addition, the credit card company probably will hike your interest rate, costing you much more money in the long run.