Five Ways To Boost Your Credit Score In 2016

Have you decided to improve your credit score in 2016? We might dislike FICO, but the financial system still largely depends upon those three digits. If your goal is a higher credit score, here are five tips to help you get there.

 

  1. Bring, and keep, your open accounts current. The most important part of your FICO score is a history of on-time payments. If an account becomes 30 days past due, you can lose a lot of points. It is much more important to bring and keep open accounts current than to handle old collection items of closed accounts.
  2. Reduce your credit card utilization. Utilization is defined as the percentage of your available credit that you are using. To calculate your utilization, divide your statement balances by your credit limits. If you have $10,000 of available credit and have a $1,000 balance, your utilization rate is 10%. According to data from Experian Decision Analytics, people with the best credit scores (above 780) have a utilization rate of 5.6%.
  3. Review your credit report from all three agencies, and dispute incorrect information. You are entitled to a free copy of your credit report from all three credit reporting agencies (Experian , Equifax EFX +1.23% and TransUnion) every year. You can download these reports for free from AnnualCreditReport.com. If you see any incorrect information, it is your responsibility to dispute the information.
  4. Don’t borrow money to build your score. One of the worst credit score rumors that never dies is the need to borrow money to build a credit score. You never need to pay interest to have a good score. You only need one transaction (that you pay in full) each month to do well. For example, you could buy one gallon of milk each month on your credit card. If you paid that statement balance in full and on time every month (never paying a dime of interest), you could have an excellent credit score. Why? Because your utilization would be low (only a gallon of milk) and your payments would be on time.
  5. Cut up temptation, but don’t close the account. Closing a credit card to celebrate paying off debt is a time honored tradition. Unfortunately, it can have a negative impact on your score. Keep the accounts open. But if you want to celebrate, just cut up the plastic. Before you do that, automate a path to a good score. Select one bill that can be paid with a credit card (for example, you cell phone bill). Set up an automatic payment. Then, set up automatic payment of your credit card bill (full statement balance) with your bank. Once you have automated responsible behavior, you can cut up the plastic. By doing this, you remove the temptation of the plastic, but ensure you have activity on your credit report every month and will continue to have a good score.

*Courtesy of Forbes.com

 


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