How can I improve my credit score?

Your credit score is a vital measurement because it is one of the factors that determines how easily you can access credit at lending institutions. People with good credit scores can get loans much more easily than those who have bad scores, and often pay lower interest rates. Fortunately, there are ways that you can improve your credit score if it is low so that you can get better deals.

Patience

The easiest, and slowest, way to improve your credit score is to wait. Lenders only care about your recent history, so most items will only stay on your credit score for seven years. Bankruptcies will stay on it for ten years. There are rare exceptions to that, but very few people will ever encounter them.

The downside to this method is that it is slow. Fortunately, there are also some faster ways to improve your credit score.

Make Payments

Credit scores consider both your history of making payments on loans and the amount of debt that you currently have. People who have a history of paying their debts are considered more likely to pay them in the future, while those who have very little debt compared to the amount the agency thinks they can handle are considered less likely to default. That means that both of those traits will increase your credit score.

You can take advantage of that by making payments on loans that you already have. It will both establish a history of payments and lower the amount of debt that you are carrying. For most people, this will be the best way to improve their credit score, but it does take some time and money to do it.

Limit Applications

Credit scores often consider the amount of inquiries about your credit score that have been made in the recent past. In general, having more inquiries will count against you. Similarly, while you do need some credit to cultivate a good score, you can hurt your score by having too many credit cards and other accounts.

If you have made a lot of applications recently and are suffering from a low credit score, you should try to limit the number of inquiries on your account in the near future. That will help to stabilize your credit score and even boost it as the number of inquiries drops and creditors get more comfortable with your account.

Disputing Errors

Mistakes happen. A few errors on your credit report can quickly destroy your score through no part of your own. One study found that almost a quarter of Americans had some sort of inaccuracy on their report. Fortunately, you can dispute those errors.

Start the process by getting a free credit report from an authorized provider. By law, each of the three major credit agencies must provide a free report to each person each year if it is requested. Check the report thoroughly for errors, and find suspicious items. After you have done so, send a letter with the details and supporting documents to the credit report agency so they can investigate the matter. It takes time, but the improvements to your credit report can be worth the effort.

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