Five Steps to a Higher Credit Score

Learn how to manage your credit score and improve your creditworthiness. Think of your credit score as a picture of your credit risk. This picture reflects your risk at a specific point in time. A picture does not change; however, when you take another one, you will probably look a little different. Similarly, when your credit information changes, your score will also change to reflect the updated information.
There are steps you can take to ensure that each time a new "credit picture" is taken, it shows your best side. By observing the following guidelines, you can influence your credit worthiness for the better:

#1 - Be Punctual - Pay all your bills on time. Late payments, collections, and bankruptcies have the greatest negative effect on your credit score.

#2 - Check your Credit Profile Regularly - and take the necessary steps to remove inaccuracies - Don't let your credit health suffer due to inaccurate information. If you find an inaccuracy on your credit profile contact the creditor associated with the account or the credit reporting agencies to correct it immediately.

#3 - Watch your Debt - Keep your account balances below 50% of your available credit. For instance, if you have a credit card with a $1,000 limit, you should try to keep the balance owed below $500.

#4 - Give yourself Time - Time is one of the most significant factors that can improve your credit score. Establish a long history of paying your bills on time and using credit responsibly. You may also want to keep the oldest account on your credit profile open in order to lengthen your period of active credit use.

#5 - Avoid Excessive Inquiries - A large number of inquiries occurred over a short period of time may be interpreted as a sign that you are opening numerous credit accounts due to financial difficulties or overextending yourself by taking on more debt than you can easily repay.


Credit Planning

Are you feeling overwhelmed with debt? Worried about how much you are spending on interest each month? Lowering the amount of debt you carry can significantly improve your credit profile, reduce the loan rates you could receive and save you a lot in interest payments. It just takes a few easy steps and a little dedication to take control of your debt.

#1 - Get the Facts

Collect all your account, loan and credit information and go over the records with a fine tooth comb. Write down the monthly payment, debt amount, interest rate and term of each debt on a sheet of paper. Next, write down your total monthly income and list your estimated monthly expenses.

#2 - Do the Math

Calculate your monthly budget and find a way to reduce your expenses so that you are saving 10% of your income each month. Apply these savings toward paying off your debts. Use the following “accelerator margin” formula to decide what to pay first:

  • Create a list of all your debts.

  • For each debt, divide the total amount that you owe by the monthly payment.

  • Put the debts in order, starting with the lowest division answer.


  • Each month make the current minimum payment on each debt.

  • Except debt No. 1 (lowest division answer), to which you apply about 10% of your monthly income.

  • Repeat until debt No. 1 is paid.


  • When the first debt is paid repeat the process by paying the minimum monthly payment on all bills except the No. 2 debt.

  • Pay the 10% amount plus the amount you previously paid for debt No. 1.

  • Continue until debt No. 2. is paid.


  • Begin eliminating debt No. 3 with your 10% savings and the amount you owed on former debt No. 1, No. 2 and so on ...


#3 - Negotiate and Consolidate

While you are working on reducing those balances with the margin” schedule, try lowering the interest rates on some of the highest interest debts. Call your creditors and negotiate for a rate reduction or consider moving your balances to less expensive credit cards (this may cause a slight drop in your credit score if you open a new credit account). Also, take this opportunity to see if you have any account balances above 50% of the available line of credit. Having high balances can harm your credit score, you can help this by transferring some of the debts to different accounts.

#4 - Refinance

After taking control of your credit card and small loan debts, take a look at your major loans. Would it make sense to refinance your mortgage or auto loan? Reducing your interest rate by a few points can potentially save you hundreds each month. Talk with your lender about a home equity loan, you can apply the amount you pull out toward reducing your high interest debts.

#5 - Stick to the plan

Create a payment calendar with the due dates and the payment amounts you just calculated. Sign up for automatic bill payment through your bank or register for online payments to keep you on schedule. Set goals for reducing your debts and don’t forget to celebrate when you reach a major debt-reduction milestone!

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