Unfortunately, a lot of people do not realize the importance of having and maintaining a good credit score until it is too late. It's when they are turned down or a job, denied from renting an apartment, or when they can not get an auto loan that they wish they had paid a little closer attention to the due dates on their bills.
For some people a bad credit score can actually mean not being able to get approved for a credit card or loan, while for others it could mean the difference in several thousand dollars from higher interest rates.
Luckily, it's never too late to fix your credit score. There are several strategies you can use to make immediate improvements to your FICO score without the help of a paid professional. Here are the top 5 ways to raise credit score:
- Know your available credit to debt ratio: One of the quickest ways to fix your credit score (or make it worse) is to improve your credit-to-debt ratio. For example, if you have a credit card with a $ 10,000 spending limit, and you have a balance of $ 5,000, you are using 50% of your available credit limit. Ideally you want to be around 25% or lower. There is a best way to solve that is to pay down your debt. If that's not an option, there are some tricks you can use to improve that ratio.
- Keep a credit history: One of the biggest mistakes people do when trying to fix their credit is closing all of their credit cards. This can actually have the reverse affect because creditors and lenders want to see that you have a history of borrowing money or using credit. If you are going to close some accounts, make sure it is the most recent accounts that you have and keep the old ones open indefinitely.
- Do not apply for too much new credit: If you keep applying for credit over and over, this raises some red flags and will hurt your credit score. Research has found that typically when someone is willingly trying to get approved for a loan or opening multiple accounts, they generally end up going on a spending spree and end up unable to pay back their debts.
- Pay off revolving debt: Paying off your revolving debt, or credit cards, will help you get back on track. It will also help you lower your credit to debt repayment and improve your credit history. All good things for your credit score.
- Pay your bills on time: One of the very best things you can do to create a near perfect credit score is to pay your bills. Set up automatic bill pay so you never have to worry about being late again and being stuck with late fees.