Your credit score helps lenders evaluate risk. Borrowers with low credit scores are high-risk, and borrowers with high credit scores are low-risk. A FICO score of 750 and above will help you get the best interest rates possible. A low credit score, on the other hand, will result in ridiculously high interest on your loans. Fortunately, there are plenty of easy ways to raise your credit score and lower your interest rates.
1. Show that you’re a loyal borrower. Instead of opening new credit accounts and closing old ones, stick with your current lenders. The longer you work with each business, the more your FICO score will increase. It helps to open accounts that can be used anywhere, not at just one store.
2. Never leave one credit card at zero while the others carry high balances. Diversify your debt! To help raise your credit score, avoid going over 30% of the limit on any of your credit cards. Anything more will make you look like a high-risk borrower.
3. Pay your bills on time. Once your credit score is up, one late payment can lower it by more than 100 points! Even if your credit report shows that you’ve made late payments in the past, just don’t let it happen again. Budget your money wisely and keep up with your payments.
4. Don’t load all your debt on the same account. It might be easier to combine all your debt on one credit card, then pay off the entire balance at the end of the month; however, it will reflect badly on you. Credit companies only keep track of your highest balance from each cycle.
5. Ask for a goodwill adjustment. If you have a great record with the company, don’t be afraid to make this request in writing. See if the company would be willing to erase one late payment from your record. The higher your credit score, the better chance you have of being approved.
6. If you’re in serious financial trouble, consider seeking professional help. Many companies can help you raise your credit score fast. Try CreditClean.com or RepairYourBadCredit.com. This small investment is well worth the savings in interest rates alone.
7. Order a copy of your credit history. According to Federal Law, the three major credit-reporting agencies (i.e., Equifax, Experian, and TransUnion) must provide this free once per year. Government-sponsored AnnualCreditReport.com is the best place to order your report.
8. Search your report for signs of identity theft, which will make your score plummet. Make sure your personal information is correct, and that all the revolving accounts belong to you. See if any transactions were made without your permission. Also make sure nobody has tried to apply for accounts in your name.
9. Have old information scrapped from your credit history. By law, most negative marks have to be removed after seven years, though bankruptcy will remain for ten. Review the reports and dispute information over seven years old, it will help increase your credit score.
10. Check your FICO score. This is completely different from your credit history. If you don’t look up your score now, you won’t know if it actually improved later! Finally, if you have to start a trial membership with the website providing your credit score, just cancel the next day and you’ll pay nothing.