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What Helps Your Credit The Most?

Helps Your Credit

What Helps Your Credit The Most?

Your credit score can often affect a series of important decisions in your life. The small three-digit number that represents your credit score can determine which types of financial products you can qualify for. Whether you’re trying to apply for a new auto loan or a credit card, it’s important to factor your credit score into your financial future. Rather than facing financial difficulty in the future, you can work at improving your credit score over time. Rather than letting your credit score continue to drag you down, you can increase your credit score by taking the right steps. Let’s go over what helps your credit the most?

Understanding Your Credit Score

Before you understand what helps your credit it is important to properly understand how your credit score is calculated. Your credit score has likely become established over a series of charges and financial decisions that you made over the years. Your credit score is calculated by applying a mathematical algorithm to the information that’s found in your credit reports. Different lenders will use different algorithms and three main reporting agencies across the United States will compute the score. Because you will have multiple credit scores and several factors that make up your scores, the scoring models will often come down to important items from your financial past like how often you paid your credit cards on time, your history of loans, how much revolving credit you regularly use, how long you’ve had your credit accounts open and the types of credit products you are accessing. 

Helps Your Credit

Improving Your Credit Score

Checking your credit scores is usually the first step to working on improvement. When you get access to your credit scores, you’ll be able to get more information about how your scores are being affected. There’s a series of risk factors that could work as a detriment to your credit score. Taking a look at some of the items that could quickly damage your credit score like late payments or errors that can be fixed on your credit score is an important way that you can make changes and start seeing resolutions in your credit score as soon as possible. 

Payment history and the way that you are using your credit will represent roughly 60 to 70% of a credit score. The critical credit reporting models really come down to the utilization ratios in your credit and your history of payments. 

To start improving your credit score it’s important to pay your bills on time and take a look at any past bills that you have resolved but not paid on time. Any loans that you have, any credit card bills, any utility charges, or rent, you will need to pay on time or early every month. If you fall behind on payments, it can affect your credit score very quickly. A missed payment or a late payment could appear on your credit report for up to seven years after the charge has been resolved. 

Pay Down Your Debt

A surefire way that you can improve your credit score is to work at improving your credit utilization ratio. This means paying down some of your debt. If you would typically charge $1000 every month for your utilities and rent and then carry the balance over a few weeks before you pay it off, consider dividing it over several credit cards if possible or paying down the balance early on. Keeping your credit card balances low is the best way to keep your utilization ratios low too. 

Once you pay down your cards, this doesn’t mean that it’s a good time for you to consider closing the accounts either. If it’s not costing you any money and annual fees, keep the account open as this can improve your credit utilization and help you build credit. 

Contact us for more top strategies for rebuilding your credit score.