8 Ways to Improve Your Credit Worthiness

30 Sep

by: Remie Longbrake | published: Sept 30, 2019

Credit controls a lot of what we do, where we live, and what we have. Much of that these days is determined by our credit score. All of us working aged have one, even if you haven’t used credit yet, you still have a score. A credit score is among the single most important number in your financial life. It’s become one of the main ways businesses judge the creditworthiness of a person. Use of your credit report has infiltrated areas we never thought it would – from job applications to insurance premiums, leasing homes, cell phone plans and much more!

Did you know that credit scores has on interest rates? Actually just a single point could cost you thousands of dollars in interest payments on a mortgage or loan. It is really taking it’s toll on our financial futures. There is hope, however! Taking advantage of these steps can go a long way.

With that said, here are several simple and legal steps you can take to improve your credit score:

Get Your Report (For Free!)
The first step in improving your credit score is to constantly monitor your credit history by getting your report for free from AnnualCreditReport.com. The Fair Credit Reporting Act requires that the three nationwide consumer reporting companies (Equifax, Experian and TransUnion) to provide a copy of your credit report every twelve months. Although you have to request your report, we highly suggest you do!

Fix Financial Fallacies
Once you get a copy of your credit history, look it over and dispute anything that’s wrong. You could have an account listed that isn’t yours or one that’s listed as delinquent when it’s not. The statistics on the number of errors in credit reports is astounding (79% may have errors)and chances are something in your report is wrong and adversely affecting your score.

Limit New Credit Applications
It’s said 10% of your score is based on your requests for new credit alone. 15% of your score is based on the length of your credit history. When you apply for new credit, both of those figures are negatively affected. Just think of it this way, if you were going to lend someone money, would you lend it someone who has been looking for credit recently or someone who hasn’t? Lenders aren’t that much different.

Pay Down Debt
30% of your score is based on the how much of your available credit is being utilized; the lower the better. If you have $50,000 of available credit and you’re using $10,000, your score would be lower than if you were only using $5,000 or even $2,000. If someone was using 80% of their credit, that would set off some warning bells for sure. Now compare that to say a utilization of 10%, although using some, certainly that is being more responsible. Payment history (which accounts for 35%) is also important, but a higher utilization figure means higher risk. By paying down debt, you’re lowering that figure altogether.

Request Credit Limit Increases
These days, the number of credit issuers willing to do anything but decrease your credit line is dwindling. If you ask, some credit card companies are willing to offer a credit limit increase without a credit inquiry. These are the types of increases you should try to obtain as inquiries will occasionally decrease your score by a couple points. By requesting, and being granted, an increase, you lower that utilization metric used for 30% of your score. It’s important however, to not spend more just because you have access to more credit. Keep those balances low to zero!

Dispute Old Negatives
Finally, if you have some old negatives that you think the lender won’t, or is unwilling, to confirm if disputed – dispute them. Some smaller agencies or businesses may not care enough, or may be in such disarray, that they can’t confirm the bureaus investigation into the old negative. If there is no confirmation or paperwork officially stating that you owe them money, they cannot keep the claim active on your credit report.

Know Your Limits

Don’t blindly fall for some card in the mail. Do your home work. Consider why you would need credit. Are there other options? Cash, is usually good, but sometimes is does make more sense to leverage credit. If your unsure when try to educate yourself or have a consultation with an expert. Always know your limits, not only on credit, but also on you. Some of us are naturally spenders, and that gets many in financial trouble. Starting out, you may want to use a secure credit card, which you need to pre-load with cash before you can use it. Although credit limits are usually small(under $2,000), they are a great way to build or rebuild a persons credit. Again, you must be careful as it don’t take long to utilize that overall balance.

Pay Off Balances

We must do all we can to pay off those balances every month. Not only will not paying off the balance negatively affect your score, it will also add interest. Get that high enough and your talking hundreds if not thousand of extra dollars added to your balance. There’s no need for that, so pay it off each month!

With these steps, you can improve your credit score. Don’t miss out of potential savings. Due your diligence and take control of your credit.

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