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Improving Your Credit Score

Expert Financial Advice

The two largest contributors to your credit score are your payment history and your level of debt. There are a few other contributors, but if you want to improve your credit score you will get the most bang for your buck if you improve in these two areas.

Payment History
Improving your payment history is a simple formula: pay your bills on time for an extended period of time. There are no shortcuts to establishing good payment history, so remember that it only takes one missed payment to damage your record. Do everything you can to get your bills paid on time and creditors will reward you with lower interest rates along with that good credit score. Although, if you do slip up, donít despair because time will wash away the black mark.

Level of Debt
It only makes sense that you would be a higher risk to repay a new loan if you already have amassed a large amount of debt. To manage this aspect of your credit score you need to understand the equation for evaluating your revolving credit utilization rating. To determine credit utilization, divide the total of all of your outstanding revolving credit by the total amount of credit available. You want this number to be as small as possible as it reflects the amount of available credit you are already using.

The math is pretty easy to understand. If you want to improve your utilization you either have to reduce the amount of total debt or increase the amount of available credit. Generally speaking, reducing your debt is the best approach, but most of us cannot just pay down our debt today. However, while you are diligently working on your debt reduction plan, you might be wise to consider raising your credit limits to improve your utilization rating. Just be careful not to use the additional credit or you will likely add to your problems.

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