The Right Way To Improve Your Credit Score

If your credit score is low and you are looking for ways to improve it, then there are a few mistakes that you must avoid. Apart from paying bills on time and not having any outstanding debts, if you follow these tried and tested rules, your score will soon show a marked improvement and you will be able to get good deals for loans, mortgages et al.

A mistake that all consumers tend to make after paying off their credit card bills is to close them so that they do not incur any debts or are tempted to use them. This is actually a big mistake. Rather than close your credit card, exercise self-control and use it to repair your credit score. Your credit utilization makes up 30% of your credit score. Therefore, do not make the mistake of closing it. Use it judiciously and keep paying your card bills on time to keep your score healthy.

Another mistake that many people make is open new credit card accounts while their old ones are still active or maxed out. While your credit limit shows an increase, your score is affected by other factors such as a hard inquiry on the credit report and the short age of credit. The inquiry is 10% of your score with length of credit is 15%. You lose score points on both accounts. Remember that your score will improve only if your other cards or in excellent condition or if they are closed. If not, there is no point adding a new burden.

Pay off the balances according to their rates of interest. A bill or account with a high rate of interest will have a negative effect on your score. When you pay off the balances soon, you will have a debt free card. Transferring the balances to one credit card will not make much difference to the score, though it will help you to pay at only one place. Another point against transferring balances is that the card will show a greater utilization and therefore, you will lose score points.

Keep checking your credit report periodically at regular intervals. Your credit report will also have notations from which you will come to know the reasons for the low score and the factors on account of which you are losing score points. This will help you in a way nothing else can.