• About
  • Mortgage Basics
  • $40K Challenge
  • Aunt Doris
  • Grandfather Says
  • Privacy
  • Archives

Len Penzo dot Com

The offbeat personal finance blog for responsible people.

A Guide to Improving Your Credit Score

By Tex Freitag

excellent credit scoreIf you’re struggling to get approved for loans or credit cards and aren’t securing favorable financing rates, you may need to work on improving your credit score. Improving your credit may sound like an intimidating process, but it’s possible to accomplish with the right guidance and determination. There are various ways to obtain good credit. Here’s a quick guide on how to improve your credit score and reap the benefits.

Make Payments On Time

Your payment history is one of the most influential factors in determining your score. When lenders analyze your credit report, they are interested in how reliable you are when it comes to paying bills. This is because your previous performance is indicative of your future performance. You can start to enhance your credit score by paying bills on time. This includes credit card bills, auto loans, rent, utilities, and phone bill. Set up automatic payments or payment reminders to stay on track.

If you have missed any payments, get current as soon as you can. Missed or late payments can negatively impact your score, but they have less of an impact as time goes by. The sooner you get current and remain current, the better.

Pay Off Your Debt

Start the task of paying your debt down instead of moving it around. If you’re struggling to pay back your debt, you may need to speak with your creditors or begin credit counseling. Once you pay down your debt, keep your balances low.

Pay Attention to Your Utilization Ratio

Your credit utilization ratio is a major factor in calculating your credit score. This ratio is determined by adding your balances and dividing it by your limit. To find out your average ratio, add up your statements from the last 12 months and divide the total by 12. It is ideal to have a ratio of 30% or lower. Having a low ratio proves to lenders that you can manage your credit and don’t max out your cards.

Keep Unused Credit Cards Open

If you have credit cards laying around that you aren’t using, you may assume it is best to close those accounts. However, you should keep them open to enhance your utilization ratio. The only exception to this is if you have an unused card that costs you a lot in annual fees.

Be Careful When Applying for New Credit

You may assume that having a mixture of credit is good — and this is true — but do not apply for new credit that you do not actually need. Having unnecessary credit can come back to haunt you. Not only may it tempt you into overspending and accumulating debt, but it can also result in too many inquiries. If you apply for new credit too frequently, you will be the subject of multiple hard inquiries of your credit. Too many of these inquiries can lower your score. Before you apply for any new credit, think about whether you truly need it and research the likelihood of approval. A denied application will reduce your score as well.

Check Your Report and Dispute Any Inaccuracies

You should pull your credit report on a consistent basis. Monitoring your report every few months helps you get an idea of whether you’re improving. Additionally, don’t assume everything on your credit report is correct. Mistakes on your report can unnecessarily impact your score. Dispute anything inaccurate so it can get corrected immediately.

Become an Authorized User

Sometimes, it can be an uphill to establish or re-establish your own credit. One way you can build credit is by signing on as an authorized user on someone else’s card. You can approach someone you trust with a good credit history about this possibility. Consider your parents, other family members or close friends. Be sure that anyone who lets you be an authorized user manages credit responsibly. If you become an authorized user on someone who doesn’t manage credit well, it will only hurt your score even more.

Request a Limit Increase When You Are in Good Standing

When you’ve decreased your utilization rate and paid down debt, you may want to ask your credit card provider for a limit increase. If the provider increases your limit, you will gain a better ratio. Make sure you only ask for an increase when you have a low balance and a good track record.

Be Patient

One of the most important things to remember while improving your credit score is remembering that it’s more of a marathon than a sprint. It may take you some time, especially if you have debts and missed payments to deal with first. But anyone can build good credit with diligence and patience. Do not get discouraged if your credit does not dramatically improve right away. Keep at it and you will reap the rewards.

Photo Credit: Cafe Credit

Leave a Comment May 21, 2019

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Question of the Week:

Are you expecting an income tax refund this year?

View Results

Loading ... Loading ...

Recent Posts

  • 5 Ways You Can Save Money on Groceries This Week
  • Economic Collapse 101: How to Prepare for Water Supply Disruptions
  • Black Coffee: Painting the Town Red
  • 5 Ways the Oil Industry Affects the US Economy
  • An HVAC Professional Teaches High School Students About the Field
  • The Fastest Way to Improve Your Credit Score
  • How to Determine How Much Rent You Can Really Afford
  • A Simple Test to Know If It’s Better to Rent or Buy a House
  • Black Coffee: Enter the Dragon
  • How to Measure Your Performance as a Trader or Investor

Disclaimer

This site is for informational and entertainment purposes only, and the content herein should not be mistaken for professional financial advice. In fact, making investment decisions based on information published here, or any other website for that matter, is more than unwise; it is folly. This website accepts advertising in the form of monetary and other compensation; as such, topics of discussion are occasionally influenced by these advertisers. Sometimes, an article may also include affiliate links, meaning, at no additional cost to you, this blog earns a commission if you click through and make a purchase (for example, as an Amazon Associate I earn from qualifying purchases). Remember, you and you alone are responsible for the decisions you make in life, so please contact an independent financial professional for advice regarding your unique personal situation.

Sign up for the weekly Len Penzo dot Com newsletter
Len Penzo dot Com Delivered Weekly
Join more than 30,000 readers and fans who enjoy personal finance and macroeconomics with an offbeat twist!
Invalid email address
Thanks for subscribing!

Popular Now:

  1. 1. My 10 Commandments of Personal Finance
  2. 2. Planning a Wedding? Here Are 9 Ways to Ensure You’ll Pay Too Much
  3. 3. 5 Things Nobody Tells You About Being Poor — for Good Reason
  4. 4. 10 Red Flags That May Signal You’re In Serious Financial Trouble
  5. 5. 4 Good Reasons Why Some Quarters Are Painted Red
  6. 6. Careers You Can Get Into Later In Life
  7. 7. 8 Store Brand Items That Are Superior to Their Name-Brand Twins
  8. 8. Caught Ya! My Teenager’s Sly Attempt to Get His Own Credit Card
  9. 9. 6 Common Mistake People Make With Their 401k Plans
  10. 10. 6 Career Killers — and How to Avoid Them

All-Time Most Popular:

  1. 1. 19 Things Your Suburban Millionaire Neighbor Won’t Tell You
  2. 2. Dear Friend: Here Are 41 Reasons Why I’m NOT Lending You the Money
  3. 3. Why Your Expensive Luxury Car Doesn’t Impress Smart People
  4. 4. If You Can’t Live on $40,000 Annually It’s Your Own Fault
  5. 5. 21 Reasons Why Corner Lots Are for Suckers
  6. 6. 4 Smart Reasons Why College Isn’t for Everyone
  7. 7. 18 Fast Facts About Social Security Numbers
  8. 8. My Ketchup Taste Test: Upset! Guess Which Brand Topped Heinz
  9. 9. Why I Prefer a Spreadsheet to Track Expenses and Manage My Finances
  10. 10. Here’s a Simple Trick for Getting Credit Card Interest Charges Waived

Copyright © 2021 Len Penzo dot Com · All Rights Reserved · Designed by Nuts and Bolts Media

Copyright © 2021 · Penzo on Genesis Framework · WordPress · Log in