A credit score is a three digit number that evaluates your credit worthiness. A bank or lender will use this score when determining your risk for paying back a loan. The higher your score is, the more a bank will trust you. It may seem strange that three numbers control your financial fate, but having a bad score will affect your chances of getting a loan.
Credit scores do not drop overnight, but getting yourself into debt and not paying your credit cards regularly can impact the level of your score. But if you are are faced with a poor score, it is not the end of the world, as there are many ways for a consumer to improve their score. Improving your score will take time, but there are simple steps you can take to get it back into a good standing.
Paying your bills on time is imperative because 35 percent of your credit score is determined by your payment history. Forgetting to make a payment every now and again will negatively impact your score. Consider setting up reminders a few days before your payments are due to help you forgo any late charges, which negatively impact your score.
Leave good debt open
Many consumers think once they have paid off their balance, they should get these accounts removed from their credit reports. Although it is best to get your credit card balance down to minimal levels, having good debt – or accounts that you have handled well without any negative marks – on your account will help you. Lenders will see these accounts and notice that you have had a good standing with your credit. Closing these accounts will take away your good standing, thus hurting your score. The longer you leave good debt accounts open, the better your credit score will be.
Checking for errors
It is very common for consumers to run a credit report in order to understand where there credit stands, but sometimes there might be errors on them. Errors on credit reports are more common than people think. Even an error that you are not responsible for can mark down your score. If you run a credit report, make sure to check it for any inaccuracies. If you have found an error, report it to the credit bureaus as quickly as you can. The faster you get a discrepancy worked out, the faster your score will improve.