Tips on How to Increase Your Credit Score

Having a good credit score is very important. Those with good credit scores are able to obtain more credit at lower rates so that they can easily finance a home, car, and other major purchases. Those with low scores often have trouble obtaining credit and may find it harder to qualify for loans, rent apartments, and even get hired for certain jobs. So what steps can you take to increase your credit score?

The first thing you should do is request a free copy of your credit report. If you don't accurately know your credit score, you won't know what you're working with and what you can do to correct it. Fortunately, due to the Fair Credit Reporting Act, all three credit reporting companies (Equifax, Experian and TransUnion) are required to provide you with a free copy of your credit report once a year. You can obtain your free copy by clicking here. You will have to pay extra to obtain your actual credit score, however, the report will include valuable information such as your existing lines of credit and their standing, a list of people who have requested your credit report (such as employers), records such as bankruptcies, foreclosures, judgments and other overdue debt to collection agencies.





Now that you have carefully looked over your credit report, you are ready to take steps to improve your score.

                                     A pie-chart depicting the breakdown of your credit score.
                                                       Picture from www.myfico.com

One of the most important, yet not commonly known, factors in a credit score is your debt to credit utilization. Debt to credit utilization is a term that refers to the ratio of the amount of money you currently have spent on credit cards compared to the amount of credit you have been expended. For example, if you have one credit card with a limit of $1000, and you have charged $500 to it, your debt to credit utilization would be 50%. You can calculate your debt to credit utilization ratio yourself by doing this simple equation:

your credit card balance
___________________ x 100
your credit limit

Your debt to credit utilization ratio should not exceed 20% if you want to see improvement in your credit score. A simple way to accomplish this is to focus on paying down your credit cards that have high ratios first. You can also improve your debt to credit ratio by requesting an increase in your credit limit from your credit card companies. Obviously this will not be feasible for everyone, but if your lender is willing to do it, it can provide a quick improvement in your score.

Another way to improve your credit score is by writing into the three credit bureaus to report any mistakes you have found on your credit report. While mistakes are not a common occurrence, they do happen and can be a major hit to your credit score that you do not deserve. If you find an error on your credit report, make sure you contact the bureau to get it corrected. Negative items that are older than seven years should automatically be omitted, so if you find them on your report, that is an error you should have corrected.

If are having trouble with your credit or issues with lenders, feel free to call my office for assistance at 718-317-5007.

- Kevin McKernan