6 Things That Can Improve Your Credit Score

Having bad credit can be detrimental to your financial health. It also places several hurdles in front of you when it comes to obtaining loans in the future. Having a poor credit score can happen to anyone for a multitude of reasons. Luckily, here are 6 ways that you can go about improving your credit score, no matter what the situation you find yourself in.

1. Pay on time
This is by far the most obvious way to improve your credit score, yet it is still the #1 way for improving your score for a big reason. Your payment history makes up 35% of your credit score.  It doesn’t matter if you’re only a few weeks late or a even a few months, paying your bills late will result in a lower credit score. Simply put, don't miss payments. 

2. Pay down debts
Your credit score is also comprised of your DTI, or Debt To Income Ratio. This is a tricky one because you have to use your credit in order to build a payment history, but you also want to have your debts paid off at the end of each month. Your credit score is a reflection of how well you manage your credit, but if you pay off your debt completely each time, then you have no credit to manage because you don't owe any money to anyone. The best way to approach this is to pay off your revolving debt each month (credit cards and other high interest loans), but leave a little payment to manage from month to month (small home equity loan, refinance of old debts).

3. Assortment of credit cards
Similar to paying off your debt each month is also showing that you can manage different types of credit cards without a problem. This is not to say that you should have 10 different credit cards, but having a few (2-3 major ones) different credit cards will improve your credit score. Have a Visa, MasterCard, Discover, and an American Express for example. Having multiple cards and credit lines open will show that you can manage your short-term and long-term credit obligations.

4. No new credit
Once you have a house to live in and an assortment of credit cards, do not open any more lines of credit unless it is absolutely necessary. It is important that you stay away from getting new credit. Why? Every time you apply for new credit, an inquiry is added to your credit report. These inquiries will drop your credit score by a few points every time.

5. Don’t ever file for bankruptcy or foreclosure
Filing for bankruptcy, or having a home foreclosed on, will kill your credit score. Both of these actions stay on your credit report for 7 years. Not only that, but they also decrease your credit score to the point of not being able to improve your financial situation. The good news is that over time (3-5 years) a foreclosure or bankruptcy will impact your credit score less and less.

6. Delete any errors on your credit report
This is the quickest and most efficient method to raise your credit score. Correcting any errors from your credit report can raise your credit score 50-100 points very quickly. There is a little time and effort that is required to do this, but fixing these errors now will save you from having to deal with them later on.

No matter how you opt to improve your credit score, it is important that you get a jump on it right now.  Having a poor credit score will kill any opportunities that you will have to get ahead in life and it will make it extremely difficult to acquire new loans down the road as well.