Free Credit Score Tips: 5 Things You Need to Know About Your Credit and 5 Ways to Improve It

By Kelly Lynn Adams

So you are feeling great: you have an exercise routine in place, you bought some new amazing clothes, you also just bought new makeup and a pair of stilettos for your girl’s night out, you love your life. But how are you feeling about your finances? Have you checked your credit score recently? Do you even know what your credit score affects and what role it plays in your life? If yes, great! You are on the right track to financial responsibility. If not, though, don’t worry! We’re going to share with you the top 5 things that you should know about your credit score and 5 ways to improve it.

5 Things You Need to Know about Your Credit

Payment History: This has a big impact on your overall credit score. If your credit report shows that you have a problem with paying on time, it can effect how much you pay for car insurance, you rent and more! Some employers even check credit scores before hiring for a new job. So, make sure that you are paying your bills on time!

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Amount Borrowed vs. Available Credit: Creditors and many lending institutions look at this ratio to see if you are credit worthy. This can make up about 30% of your credit score so make sure you don’t borrow more than 50% of the available balance on each of your credit cards. (Although, ideally, you don’t want to borrow more than 33% of your available balance at any time.) Owing a small amount on several cards is better than maxing out one.

Keep Your Credit Card Accounts Open: Rather than closing your accounts, which can lower your credit score, it is best to keep them open and work on paying them off. Even keeping a small balance is recommended.

New Debt and Inquires: Inquires occur when anyone runs your credit score. For example, when you apply for a mortgage or buy a car and your credit score is run, your credit score is lowered. Not by much, but make sure you know how many times your credit is being checked since this does account for 10% of your score.

Type of Debt: The last 10% of your score is based on the type of debt you have. Student loans, mortgages and auto loans are all considered “better debt” because they’re secured (the lender can repossess your car, take over your house and even garnish your pay for not paying). Credit card debt, or unsecured debt, is less favorable.

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5 Ways That You Can Improve Your Credit

Get a Copy of Your Credit Report: You can get a credit report from www.annualcreditreport.com. After you receive your credit report, ensure that all the information is correct and follow up to dispute and remove any inaccurate information.

Stop Using Credit Cards: We know this maybe hard, but it’s important to learn how to live within your means. If you have high interest rates on your credit cards, try transferring your balances to a lower interest credit card. Once you stop frequently using your credit cards you will see your credit card balances go down.

Don’t Apply for New Credit: Depending on your credit score, if you keep applying for new credit cards not only may you be denied, but also you may inadvertently lower your score even more since this classifies as an inquiry.

Get Current with Your Payments: Your payment history makes up 35% of your credit score, so make sure you do your best to get current and stay current – even if you have to send little payments throughout the month.

Be Patient: This can be the hardest part, but, if you continue to pay down your debt and to live within your means, you will see an improvement in your credit score over time.

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