Need to improve your credit? Bad credit can cost you thousands of extra dollars through higher interest rates on loans. If you anticipate borrowing money in the future then you should try to improve your credit rating. If you are perceived to be a good credit risk lenders will loan you money at lower interest rates thus saving you money. These savings will add up over your lifetime. Here are 4 tips to improving your credit rating.
1. Pay off credit cards
Take an inventory of your credit cards and their balances. Come up with a plan for lowering and/or paying off your balances. Stop spending money you don’t have. You will increase your credit rating if you have low or no balance compared to the total amount that you can borrow. If you have more then one credit card pay off the large balances first.
Credit rating agencies like to see borrowers with a low balance compared to the total credit limit. If you have a $5,000 limit your score will improve with a zero or low balance versus having a balance for $4,800.
2. Pay on time
Being a few days late is understandable and can happen to anyone. What you want to avoid is being 30 days late. If you have a decent credit score one 30 day late can drop your score by over 100 points. It seems a bit unfair but unfortunately that is how it works. If you cannot make a payment call your credit card company and tell them that you will not be able to make a payment. Ask them if they can refrain from reporting the 30 day late.
3. Remove Late Payments
Obtain a copy of your credit report and look who is reporting late payments. Call those credit cards companies or lenders and ask them to remove any or all late payments. If you are a good customer they just might do it. I was on vacation and missed a credit card payment one time. I called the company and told them the story and reason behind the late payment. They agreed to remove it.
4. Keep all of your credit cards
If you have a number of cards with low balances don’t consolidate them to one card. Remember, if your balances increases to too high of a percentage of your total credit limit your score can suffer. Just keep the low balances on all of the cards and get them paid off.
Following this 4 steps will help improve your credit scores. These work best if your score is low to mediocre. If you have a score above 700 you may not see a huge increase in credit score. The bottom line is simply to spend what you can afford, do not be late on payments, pay off your balances quickly, fix any errors on your credit report and don’t stiff anyone. Do this for a long enough period of time and you will have good credit.
Slade Tanner – Sarasota Mortgages
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