Improve Your Credit Health with These Simple Steps

If you think that money rules the world, you’d be mistaken. In fact, when it comes to buying power in the United States, nothing gets you more than a healthy credit score. Sure, you can pay cash for a majority of your purchases, but when it comes to making the big purchases in your life, such as buying a house or even a car, a healthy credit score will help your dollars go farther.

handing over money

If you are like millions of people, you may find that your credit score isn’t as healthy as lenders would like when you go to secure a loan, purchase a car, lease a new apartment or buy a home. If you’ve been turned down for credit because you have a low credit score, don’t get discouraged; there are some simple steps that you can take to turn things around and get the bank to turn their “no” into a “yes.” Before you can start to take the necessary steps to improve your situation, you need to obtain a copy of your credit score. There are a number of sites where you can obtain a copy of your score.

Be Mindful of Credit Card Balances

One of the easiest ways to improve your credit score is to make sure that you maintain low balances on your existing credit cards. You want to strive to keep the amount that you owe, compared to the available credit you have, at a rate of 10 percent or lower, according to Barry Paperno, consumer affairs manager with MyFICO. If you have credit cards that are close to their limit, you can increase your credit score by paying down those balances.

Deal with Past-due Accounts

Everyone has fallen behind on payments at one time or another. When a payment is late, it has a huge impact on your credit score. Your credit history accounts for 35 percent of your credit score. That means that making even one payment more than 30 days late can drop your credit score. If you have several accounts that are past due on your credit report, you can’t waste any time correcting the problem. Accounts that are more than 90 days late have a bigger negative impact on your credit score, notes Abby Hayes, contributing writer for U.S. News and World Report. It is important to get these accounts current as soon as you can. Once you’ve caught up on the most delinquent accounts, you can start to gradually catch up on the rest of your past-due accounts.

Don’t Close Accounts

Part of your credit score is determined by the length of time you’ve had established credit with each creditor. You are rewarded for positive, long-term history that you have established with each creditor, according to the contributors at Entrepreneur. So, if you have credit cards that you aren’t using, it’s best to keep them open. If you want to keep from using the cards, simply put them out of sight and forget that you have them. Only use one or two cards, and give your credit score the positive boost that it may need.

Pay off Balances

There are a number of different philosophies regarding the best way to pay off credit balances. One approach is to pay off your largest debt first, advises Mandy Woodruff, writer at Business Insider. She suggests that by paying down the largest debt first, you can save a ton of money on the interest charges related to the account. Another thought regarding paying off balances is to tackle the balance with the highest interest rate. By paying this debt off first, you can get out from under the high interest rate and have more money to put toward your other cards. Another plan is to pay off the card that has the lowest balance first, advises Curtis Arnold, founder of CreditRatings. This gives you the instant gratification of having a single card paid off rapidly and can help motivate you to keep going. It doesn’t matter which method you choose; the only thing that matters is paying off the balances on your cards so you can increase your credit score.

Having a healthy credit score is vitally important to getting what you want in life. Without it you will have a difficult time buying a car, obtaining new loans, finding a new apartment and owning your own home. If you’re plagued by a low credit score, you don’t have to give up on the things that you want. You simply have to put in some extra effort and do the work that is needed to improve your credit score. While there isn’t an overnight fix to the problem, over time you’ll be able to see an improvement in your score and will start getting more approvals from the banks.

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