Because
of the way credit
scores are
calculated, some
actions you take
will affect your
credit score
better than
others. In
general, paying
your bills on time
and meeting your
financial
responsibilities
will boost your
score the
most. Owing
a reasonable
amount of money
and being able to
repay it will show
lenders that you
take your finances
seriously and pose
little threat of
lost money.
There are a few
tips that, more
than any other,
will boost your
credit score the
most:
Tip # 4:
Pay Your Bills On
Time
One of
the best ways to
improve your
credit score is
simply to pay
your bills on
time. This
is absurdly
simple but it
works very well,
because nothing
shows lenders
that you take
debts seriously
as much as a
history of paying
promptly.
Every lender
wants to be paid
in full and on
time.
If you
pay all your
bills on time
then the odds are
good that you
will make the
payments on a new
debt on time,
too, and that is
certainly
something every
lender wants to
see. Experts
think that up to
35% of your
credit score is
based on your
paying of bills
on time, so this
simple step is
one of the
easiest ways to
boost your credit
score.
Paying
your bills on
time also ensures
that you don’t
get hit with late
fees and other
financial
penalties that
make paying your
bills off harder.
Paying your bills
in a timely way
makes it easier
to keep making
payments on
time.
Of
course, if you
have had problems
making your
payments on time
in the past, your
current credit
score will
reflect
this. It
will take a
number of months
of repaying your
bills on time to
improve your
credit score
again, but the
effort will be
well worth it
when your credit
risk rating
rebounds!
Tip
#5: Avoid
Excessive
Credit
If you
have many lines
of credit or
several huge
debts, you make a
worse credit risk
because you are
close to
“overextending
your
credit.”
This simply means
that you may be
taking on more
credit than you
can comfortably
pay off.
Even if you are
making payments
regularly now on
existing bills,
lenders know that
you will have a
harder time
paying off your
bills if your
debt load grows
too
much.
The
higher your debts
the greater your
monthly debt
payments and so
the higher the
risk that you
will eventually
be able to repay
your debts.
Plus, statistical
studies have
shown that those
with high debt
loads have the
hardest time
financially when
faced with a
crisis such as a
divorce,
unemployment, or
sudden
illness.
Lenders
(and credit
bureaus who
calculate your
credit score)
know that the
more debt you
have the greater
problems you will
have in case you
do run into a
life
crisis.
In order
to have a great
credit score,
avoid taking out
excessive
credit. You
should stick to
one or two credit
cards and one or
two other major
debts (car loan,
mortgage) in
order to have the
best credit
rating. Do
not apply for
every new credit
line or credit
card “just in
case.”
Borrow only when
you need it and
make sure to make
payments on your
debts on
time.
You
should also know
that taking out
lots of new
credit accounts
in a relatively
short period of
time will cause
your credit score
to nosedive
because it will
look as though
you are being
financially
irresponsible.