Sometimes it seems like you just can’t win. If you have no credit you can’t get financed and if your credit score is less than perfect, you can’t get financed. Stop fretting and follow some simple steps to improving your credit score.
The first thing you need to find out is what goes into creating a credit score and who is doing the scoring. Merchants rely on what is called a FICO score. This is a sliding scale that goes to 900 points and determines what kind of risk you are to lenders. The higher the score the easier it is to be financed at a lower interest rate. Three national companies prepare credit reports and scores and you can vary from each company. To determine scores several factors are considered which include the length of time you have lived at your current address, how many creditors you owe, the ratio of used credit to your current credit lines, how many inquiries for credit you’ve had in the last six months, and whether you pay your bills on time.
If you are still going to school credit card companies provide special credit cards for students. It is recommended that you take advantage of these credit cards to establish your credit. If you do not abuse them, pay them faithfully on time, you will be rewarded with a good credit score and be prepared for financing a car or a home when you graduate. Even if you make small purchases and pay them off the next billing cycle, you are establishing a credit score.
Once per year you can request a free copy of your credit score from the three credit reporting agencies. Go to www.annualcreditreport.com and request copies of your report. Then take time to go over them thoroughly and note any items you may disagree with and report them to the companies. You can do this online. It is easy to do and critical to improving your score. Should you apply for credit and be denied, you have the right to request a copy of your report to determine if any errors appear that effected the decision. One in five people have found errors on their credit reports. Don’t let these errors slide. Have them corrected immediately because they make a difference in whether you get that new Mustang you have your eye on.
The single most important thing you can do to improve you credit score is to make your payments on time. If you have missed a payment, get current and stay current. Delinquencies remain noted for six months and have a negative impact on your score. If you are forgetful or have a habit of putting things off, sign up for automatic deductions from your checking account. If you’ve hit a bumpy spot in your finances, don’t wait for your account to go into collection. Call your creditor and explain what is going on and ask what you can do to keep from having your account reported. That could remain on on your credit report for seven years.
Whatever you do, do not throw your money away on paying for credit repair service. The only legal solution is to pay your bills on time and to make corrections on your credit report if errors are found.
Richard Towler helps run Secured Credit Cards 4U a US based credit card comparison site specializing in credit cards that can boost or build your credit score.