How to Build Your Credit Score

A solid credit score can lead to lower interest rates, loan
approvals, and even job opportunities. If your score is
currently less than what you would like it to be, you can
take measures to improve it. By understanding the basics of
the system, you can start building your credit score today.

What Credit Score Is

The term "credit score" refers to the overall health of
your finances. The Fair Isaac Corporation usually
calculates this three-digit figure. Fair Isaac takes
information from your credit report and punches the numbers
through a series of calculations. Your payment history and
the amount of outstanding debt you have are taken into
consideration. The length of credit, new credit, and type
of credit you have are also reviewed.

Before issuing credit, many lenders check your credit
score. You may be accepted or denied based on your credit
score. For this reason, it is important to maintain a good
score. And doing so can be easy. Following are a number of
steps you can take to help you build your credit score.

Make Payments on Time

By far the easiest and best way to build your credit score
is to avoid late payments. By paying bills on time, you
show lenders that you are reliable and consistent. If you
have a hard time remembering when payments need to be made,
try streamlining the due dates. Call your lenders and ask
to have the due date changed to a certain day of the month.
Set up all your bills to be due on the same date. You can
also line up automatic payments. That way, the money is
withdrawn from your checking account at the same time each
month. Have reminders sent to your email or mailbox. Find a
method that helps you pay on time, every time.

Pay Down your Debt

Paying off debts that you have is another way to build your
credit score. Strive to use only 35% or less of your credit
limit. So if you have two credit cards that each have a
$5,000 limit, you have a total credit limit of $10,000. Aim
to keep your total outstanding balances under $3,500. This
will lower your credit risk, thereby raising your credit
score.

Keep Accounts Open

If you have had a credit card for a long time and rarely
use it, think twice before closing the account. If you have
a solid history of on-time payments, it may be in your best
interest to keep the account open. It will show lenders
that you have a longer credit history.

Use your Credit Card Wisely

Building your credit score does not mean getting rid of
your credit cards or not using them. But before you make a
purchase, consider how you will pay it back. Look into what
you can and cannot afford before swiping the plastic.

If you decide to open a new account, keep your shopping
time limited to 14 days. Once you have the credit card, pay
off your balances on a timely basis. This will improve your
credit score over time.

These are just a few ways to build your credit score.
Staying on top of your finances and managing them routinely
will help your FICO numbers increase. Before you know it,
you will have a high credit score.

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