Tips to Improve Your Credit Score

After seeing your credit score and reviewing the five categories used to calculate it, you will want to consider the following four areas to improve your score:

Pay bills on time. Payment history is the single most important factor in determining your credit score, and paying bills on time is one of the fastest ways to improve your score. Delinquent accounts can devastate your score. Missing even one payment can knock 50-100 points off a good score.

Pay down your debts. Paying down debts is another quick way to improve your score. Charge less and pay more on your balances. Lenders want to see a lot of breathing room between the amount of debts and credit limits. When you pay down your debt, you increase the gap between your balance and limit, which helps your score.

Keep closed, paid-off accounts open. Closing accounts can hurt your score because it lowers the amount of total credit available to you and makes your balances appear larger in credit score calculations. Also, closing old accounts will shorten the length of your credit history and make you seem less creditworthy.

Avoid bankruptcy, if you can. Bankruptcy should be a last resort. Filing bankruptcy is worse than delinquencies, loans or collection activity and can knock 200 points or more off a good credit score. If your score was slowly on the decline due to missed payments, late payments, and/or charge-offs prior to filing bankruptcy, you will see less of a reduction. Once your score falls below 620 (which it often does after filing bankruptcy), credit opportunities will be scarce and costly. If you are overwhelmed with debt and are considering bankruptcy, know the impact it will have on your credit score and seek good objective advice before filing.

To receive a detailed report of your credit score including positive and negative factors as well as practical ways to improve your score, click here.