Your credit score is a vital component of your financial life. You may not realize its use, but your credit report and your resulting credit score affects the type of mortgage you can get and the amount of interest you will pay on the loan you need for the car you want. If your credit score is low, you can take steps to fix it.
Fixing Errors
If you'd like to improve your credit score, first get a copy of your credit report. This can be ordered from the major bureaus, TransUnion, Equifax and Experian. Once received, review it for any errors or omissions. Any mistake to your credit availability or your payment history will hurt your credit score, so report any errors as soon as possible. You are entitled to one free annual credit report from the Annual Credit Report website.
Lowering Debt
Lenders do not view excessive debt in a favorable light. If you owe too much money to too many lenders, a lender may deny you a loan out of fear you will not be able to meet the repayment requirements. Having little debt means you can afford to spend your disposable income on repaying loans. Your credit report will be reflected positively, and in turn so will your credit score, if you reduce your outstanding debts.
On-Time Payments
Paying your bills late will hurt your credit rating. In fact, late payments have the highest impact on your credit score, making up 35 percent of the tally. Always pay your bills on time. If you are behind on paying your bills, start paying them on time. While it will be a gradual process, your credit score will improve as you show that you are capable of paying bills on time. If necessary, set up automatic bill payments with your bank.
Limit Credit Card Usage
It can be easy to swipe that credit card every time you go to the mall, but that's not the wisest thing to do when trying to improve your credit. The smart play is to stay far away from approaching your credit limit. If you are nearing your credit card limit -- for example, owing $9,000 on a $10,000 limit card -- it will be reflected on your score. To have a positive impact on your credit score, you need to have some breathing room. Do not allow your credit limit to reach 80 percent of your limit, with 30 percent being most ideal.
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