Keys to Raising Your Credit Score

Maintaining a good credit score is important when using a lender to purchase a home, car or other items on credit. Consumers with high credit scores can borrow money at much lower interest rates than consumers with poor credit scores. If you desire to improve your credit score, follow a few key steps. How much your credit score improves and how long it takes depend on your personal credit situation.

Improve Payment History

The primary way to improve your credit score is to improve your payment history. According to My FICO, payment history accounts for 35 percent of a consumer's credit score. Failing to pay your debt on time can cause your credit score to plummet. When you miss a payment deadline, you should get it current as quickly as possible. To help make timely payments, you can set up automatic payments with your creditors and bank. You should make payments even if they only equal the minimum amount. A small, timely payment is better than not paying your bill at all. As you continue to make timely payments, creditors report your positive payment history to the credit bureaus and you score begins to slowly increase.

Reduce Your Debt

Although this is often the hardest task to accomplish, reducing your outstanding debt while maintaining your credit limits causes your credit score to increase. Your outstanding debt makes up 30 percent of your credit score. After several months of paying down your debts, your credit score should improve, and even a modest increase in your credit score can cause a significant difference in the interest rate you receive on a mortgage or car loan.

Fix Errors

Errors on your credit report can cause a decline in your credit score. To improve your credit score, you should contact the credit bureau reporting the erroneous information and inform them of all errors. You may need to provide proof that the blemish on your credit report is not accurate. For example, if your report states an incorrect account balance for one of your credit accounts, you can submit your most recent credit card statement or a letter from your credit card company stating the correct balance of your account. Keep copies of all documentation sent to credit bureaus and send certified mail to verify they got your information.

Use Your Older Cards

The length of your credit accounts plays a part in your credit score, around 15 percent. Your older accounts impact your credit score more than newer accounts. When choosing between your new and old accounts, you should use your older credit cards to improve your credit score. Using your older accounts does not mean you must rack up a huge credit card bill. You can simply make periodic purchases and pay off the bill when it's due. To avoid a decrease in your credit score, keep your accounts open. Closing your credit card accounts can cause a decline in your credit score.