A credit score is a reflection of all the financial records found in your credit report. It is not solely based on your current financial situation.
Presented below are a few ways to improve your credit score.
- Ensure that all the information in your credit report is correct
There are three main credit bureaus, namely, TransUnion, Equifax, and Experian. Each of them makes a credit report for all consumers. Any mistake in the credit report will have an adverse impact on the credit score. It is possible for mistakes to be present in credit reports, as was shown by certain studies that revealed that nearly 1 in every 5 people had errors in their credit report.
It is important for all consumers to ensure that the credit report does not have any inaccurate data. It may be noted that all people are entitled to a free copy of their credit report from each of the credit bureaus each year. You can check the report and report any corrections to the respective bureaus.
You can check for data like, are all the credit accounts reported; is personal data like date of birth, social security number, address, etc, correct; are there credit applications or accounts that are not yours; have some payments been reported as being late even when paid on time; are decade old financial items still present on the report, etc?
If there are any errors, then you can dispute it with each of the bureaus. You can dispute on your own or take the help of an agency.
- Keep a check on credit card balances
One of the main factors that affect the overall credit score is the amount of revolving credit vis-à-vis the amount you actually use. The credit score will be better if this percentage is smaller.
For a better credit score, the balances need to kept low and they need to be slowed paid down. Individuals who have small balances in several credit cards need to pay them off one by one and eliminate them. Once it is paid off, keep two or three credit cards (preferably with lower interest rate) and use only them for different purposes. Doing this will help boost the credit score!
- Leave old paid debt on the credit report
It is incorrectly believed by many that presence of older debt on the credit report is not good. Thus, as soon as debts like car loans, home loans, etc., are paid off, people try to get them removed from their report.
Credit score is affected by negative items; however most of them get removed in 7 years. Good debt, i.e., debt which has been paid up and handled well during the term of the debt, is however good for the credit score. A longer history of good debt on your credit report will have a positive impact on the credit score. Good debt is proof of a good repayment record and hence let it remain on the records for as long as possible.