Your credit score ranges between 300 and 850 and determines your eligibility for new credit. Lenders, insurance companies, landlords and employers may all pull and review your credit reports. The better your debt management skills, the higher you can expect your credit scores to be. There are actions you can take, however, to boost your credit scores and increase your chances of being approved for low interest rates.
Dispute Inaccuracies
A survey by the U.S. Public Interest Research Group reveals that 79 percent of all consumer credit reports contain errors of some kind with 25 percent of those errors being significant enough to result in a denial of credit. The Fair Credit Reporting Act gives all consumers the right to contest credit report errors.
If you suspect that your credit report may contain errors, you have the right to request a free copy of your credit report every 12 months. If you find any inaccuracies, you can report the mistakes to the credit bureaus by phone, mail or online. Each credit bureau is legally required to investigate your report and, if any information appears on your credit file in error, correct the report.
Pay Down Credit Cards
The amount you owe on each of your credit cards compared to your available spending limit is your debt utilization ratio. This ratio has an impact on your overall credit score. Using all of your available credit sends the message that you are having financial difficulties, whether or not this is actually the case. It also negatively impacts your score. By paying down your credit cards, you can increase your debt utilization ratio and improve your credit score.
Check For Obsolete Items
Most common negative credit report entries aren't allowed to hang around and damage your scores forever. Late payments, credit card charge-offs and collection accounts may remain on your file only for seven years and six months. If you notice obsolete entries on your credit report that are dragging down your score, report them to the credit bureau for immediate removal.
Keep Old Accounts Open
It's tempting to close out old credit card accounts after paying them off, but it doesn't help you credit score. The FICO credit scoring model considers the length of your credit history an important factor when calculating your credit score. By closing old accounts, you shorten your credit history and hurt your score. In addition, closing old credit accounts lowers your debt utilization ratio, which is also detrimental to your credit. Some credit card companies will close your account if you don't regularly use your card, so make small purchases on your oldest credit account periodically to protect it from closure.
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