A clean credit report and a high credit score opens the door to financial opportunity. If you have a high rating, you qualify for the cheapest interest rates, and oftentimes, lenders will compete for your business. Consider a few easy ways to build a solid credit score.
Eliminate Debt
Get rid of your consumer debt to help tidy up your credit score. Debt balances make up 30 percent of credit profiles, and paying off credit card balances can cause your credit score to jump. As a rule, keep your balances at less than 30 percent of your given credit limit.
Payment Record
Sending in a late payment harms your credit profile. Clean up your credit score with on-time payments every month. Your payment record makes up 35 percent of your credit score, but timely payments help you get better rates and easier financing.
New Accounts
Some people get into the routine of applying for department store credit to save a certain percentage off their purchases. Inquiries can affect credit scores by 10 percent; build a better credit profile by applying for credit only when necessary.
Additional Accounts
A strong credit file usually results from a mixture of credit accounts -- perhaps a couple of credit cards, an installment loan and a home loan. If you currently only have one or two credit accounts, diversify your credit profile by adding a different type of account. The type of credit you hold influences your scores by 15 percent.
Credit Reports
Outdated information, or erroneous updates to your credit report, can cause your credit score to drop. Monitor your report every now and then to check for mistakes. Get reports from Annual Credit Report, and write a dispute letter to your creditor and the bureaus, if you detect mistakes on your profile.
Settling Old Accounts
Don't leave unpaid collection accounts on your credit report. Get in contact with old creditors or collection agencies, and work out a deal to pay off any old balances. As part of this deal, ask creditors to remove the unpaid account from your credit report after you pay the balance.
Personal Comment
Credit reports have space after each listing, and this allows you to include a comment or explanation for the account. Adding an explanation to your credit report is to your advantage if you defaulted, or were unable to make a payment due to extenuating circumstances, such as loss of employment. Future creditors will read your comment and take this information into account when reviewing credit applications.
Rebuild after Bankruptcy
Don't let a bankruptcy destroy your credit profile. Tidy up your score and rebuild your history by acquiring new accounts after your discharge. Most banks will give you a secured credit card to help you start fresh, and if you didn't include a student loan, mortgage loan or other debts in the bankruptcy, make these payments as agreed, to steadily rebuild your credit score.
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