A better credit score does not happen by accident, and it does not happen because you have a high net worth or good income. In fact, these factors have nothing to do with your credit score. Your credit score is dependent on how you manage your debt and open lines of credit. By managing them correctly in the eyes of the credit reporting agencies, you can build a better credit score at any income level.
Pay Your Bills On Time
A major factor in calculating a person's credit score is how they pay their bills. On time payments over time will improve the score, or keep it in the healthy ranges. If you go past due on just one bill, it will affect your credit score. The more bills that you become past due with, the more your score will drop. The severity of the delinquency also matters, with a 90-day late payment being worse than a 30 day late payment. Always pay your bills before they are due to maintain the top credit score.
Keep Balances At Manageable Levels
The FICO score depends on how much debt you are carrying on revolving accounts. The amount of debt is not the most important part of this equation. This must be measured as a ratio of debt to available credit. You should never carry more than 30 percent of your available credit as a balance on your credit cards and other revolving accounts. Some experts say 10 percent is even better. For example, if you have a credit card with a $2,000 limit, you should carry no more than $600, or 30 percent of the limit, as a balance, with $200 being even better for your score.
Don't Apply For Unnecessary Credit
Too many lenders asking for copies of your credit report can affect your credit score. Any one inquiry will not necessarily lower your score, but several unrelated inquiries over a period of a few months can damage it. Banks view someone who is applying for a large number of accounts as someone with potential financial problems who is shopping for credit. The exception to this is multiple inquiries within a relatively short time period, within a month, for instance, that are for the same purpose. The scoring models view this as one application to allow a consumer to shop for the best interest rates without penalty.
Other Methods
Dispute any inaccurate information on your credit report. Inaccurate negative information can lower your score. Write a letter to the credit agency telling them why you think the information is inaccurate, and see if they will remove the information. Do not close older credit accounts even if you don't use them anymore. There was a time when open credit lines like these were viewed as potential debt, but now they count as older accounts, and lengthen the average time that you have had credit lines open. A long-term credit history is better for the credit score.
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