Credit scores can seem baffling. Indeed, the credit rating industry has a stranglehold on your financial life with some pretty nonsensical rules. With bad (r no) credit, it's next-to-impossible to get a mortgage, get an auto loan, or finance much of anything.
You can thumb your nose at the industry, but it's unlikely to do you any good since almost all lending institutions have bought into the credit bureau mantra and system.
If you need to improve your credit rating the rules are pretty straight-forward. Here are the steps to take to boost that credit score once and for all:
- Pay Your Bills On Time
Create a simple system that allows you to keep up on your bills and pay them on or before the due date. Consider setting up automatic payments through your bank.
- Dispute Credit Report Errors
You may be surprised to find out how many erroneous entries appear on your credit report. Document all errors carefully and contact the credit bureaus with the information.
- Don't Max Out Credit Cards
While using credit is actually better for your score than paying cash (stupid!), keeping balances low and never approaching your credit limits is necessary.
- Apply for New Credit Rarely
Every time you apply for credit and your report is pulled, this information is recorded on — and negatively impacts — your credit score. Another inane reporting scheme, it attempts to show that if you're applying for credit, there must be something wrong.
- Leave Old Accounts Open
Closing a whole slew of unused accounts seems like a good idea and a way to clean up you history. Unfortunately, doing so will usually negatively impact your utilization ratio (the amount of total debt divided by total available credit). In addition, closing the oldest accounts (even if unused) will shorten the length of your credit history.
If you need to make sure your credit rating is up to snuff, grab a free credit score online and get started putting your financial house in order.