February 26, 2009

There are several ways to raise your credit score, but some are better than others.  To start you need to understand how credit scoring works.  Then you can then use that to determine the best practices to achieve a good credit score.  But here is a short list to get you started.

1. Start Paying Your Bills on Time

The largest core area of your credit score is your payment history.  And not paying on time is going to kill it.  This is the number one best way to raise your credit score.  It does sound simple but individuals struggle with this piece every month.  It often has to do with the lack of a budget or lack of experience managing money.

2. Pay Down Your Debt

If you owe a lot, you need to develop a plan to pay down your debt.  This is the second biggest way to raise your credit score.  Your utilization is 30% of your credit score and being close to your limits will hurt it.  It also comes back to having a budget and developing a plan to use extra money to pay down debt.

3. Avoid Balance Transfers

Many individual use and advocate balance transfers as a way to get out of debt.  The truth is they often don’t work.  It has the effect of just moving the debt around.  Also, since your credit utilization is calculated on an account by account basis, you will can this to rise.  This will put you closer to your limits with that card and hurt your credit score.

4. Don’t Apply For Credit If You Don’t Need It

Don’t think you should apply for every credit card offer that comes to you.  Also, if a store offers you a 10% discount to apply for a store credit card, it isn’t worth it.  Each time you do this it creates a credit inquiries.  These have the ability to hurt or not hurt your credit score.  The idea is if you are applying for new credit all the time you represent a risk and will hurt your credit score.  You should only apply for credit as you need it.

5. Dispute Credit Report Errors

If you are looking of how to raise your credit score, you should start with disputing errors on your credit report.  You don’t think there are any errors.  Well, chances are you are wrong.  Studies have shown that 70% of credit reports have mistakes on them.  The only who is going to catch these most of time is you.  So check for and dispute errors.  This will help to raise your credit score.

6. Check Your Credit Report More Than Once Per Year

Now that you understand that errors are reported about you, you need to be looking for them.  You should look at your credit report a minimum of once per year, but if you really want to stay on top of it, twice would be better.  This prevents recently reported errors from staying on there if you dispute them.

There are even more than these and I will continue add more.  I hope that these are helpful