At Direct Capital, we know that having good credit is important. Even when getting commercial financing, your personal credit could be called into question. Better scores almost always mean better rates, that’s why having a good credit score is always important. If your score is less than ideal, here are some tips to get it back up to where it should be.
Check your report for false information. The fastest way to bring down your score is to have errors on your report and to not be aware of it. You’re entitled to one free report per year, according to the Fair Credit Reporting Act, so make sure you’re using it. Visit AnnualCreditReport.com if you haven’t already. If you notice something on your report that seems erroneous, make sure you call the credit company reporting the information and work to get it removed.
Pay more than the minimum balances. If you’re just hitting the minimum balances of your credit cards each month, chances are it is going to be nearly impossible to get out from under a mountain of debt. It’s likely those minimum payments are not even covering your interest on those cards. Try to pay as much as you can afford to your credit card payments each month, paying more to the card that is closest to its limit. It’s a good rule of thumb to aim for at least double each minimum payment to ensure that you’re making a dent in the debt.
Don’t close unused cards. It may seem like closing and getting rid of unused credit cards is the smart thing to do, but since the credit bureaus factor in your credit usage to free credit ratio as part of your score, closing unused accounts could have a major negative impact on your score. If your credit company will automatically close inactive cards, make it a point to charge something small (and pay it off in full) once a month.
Be mindful of your credit inquiries. Every time a lender checks your credit, this acts as a “hit” on your report and it’s looking at unfavorably by the credit reporting agencies. So, it’s important to not just apply for any and every loan on the planet. If you’re shopping for a loan or a line of credit, make sure you do it quickly. Several hits on your account over a short span of time (one or two weeks) will be looked at more favorably than those same hits on your account, but spread out over a period of several months.
How do you keep your credit score up?