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The credit reporting industry has gone through tremendous changes in recent years. Most of these changes are the result of pressure brought to bare on the industry by Congress and public interest groups. Needles to say, these groups felt that the consumer wasn’t getting a fair shake when it came to credit reporting and the effects of it. And rightly so with a history replete with stories of incorrect negative information on the credit files of unsuspecting citizen’s un-removed information and an industry that turned a deaf ear to outraged individuals.

4 Tips to boost your credit score


The Best Ways to Boost Your Credit Score

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 1: 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 ratingrebounds!

Tip 2: 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.

Tip 3: Pay Down Your Debts

If you have a lot of debt, your credit score will suffer. Paying down your debts to a minimum
will help elevate your credit score. For example, if you have a $1000 limit on your credit card
and you regularly carry a balance of $900, you will be a less attractive credit risk to lenders than
someone who has the same credit card but carries a smaller balance of $100 or so. If you are
serious about improving your credit score, then start with the largest debt you have and start
paying it down so that you are using a less large percentage of your credit total.
In general, try to make sure that you use no more than 50% of your credit. That means that if
your credit card has a limit of $5000, make sure that you pay it down to at least $2500 and work
at carrying no larger balance. If possible, reduce the debt even more. If you can pay off your
credit card in full each month, that is even better. What counts here is what percentage of your
total credit limit you are using – the lower the better.

Tip 4: Have a range of credit types.

The types of credit you have are a factor in calculating your credit score. In general, lenders like
to see that you are able to handle a range of credit types well. Having some form of personal
credit – such as credit cards – and some larger types of credit – such as a mortgage or auto loan –
and paying them off regularly is better than having only one type of credit.

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