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Want to improve your credit score? The first step is to understand all the factors that can cause big moves to your score. Here are some tips to follow that will help you increase your credit score and keep it healthy.
1. Payment History / Very High Impact
Whatever you do, try to avoid making a late payment. The primary point of a credit score is to give lenders a way to assess your ability to pay back a loan. A single missed payment will hit your credit score and hit it hard. If you know you absolutely cannot make a payment, see if you can work out a solution with the creditor before the bill is due. Sometimes a lender may work with you to find a solution. See your payment history.
2. Age of Credit / High Impact
Start building credit early because the longer you have a credit history, the better your credit score generally is. After all, the age of credit is one of the major factors. To maintain your credit’s age, keep your oldest credit account open. Even if it isn’t being used, this card will act as a counterbalance to any new credit cards or credit accounts you open by keeping your average account age higher. See the age of your credit history.
3. Utilization / High Impact
Consumers with the best credit scores have generally less than 10 percent credit utilization. Keep this as your ideal goal. For example, if your credit card's limit is $5,000, don’t put more than $500 on that particular card. Once you reach $500, you should stop spending, start making purchases on a different card, or start paying cash.
4. Negative Marks / Medium Impact
Problem accounts show up as either delinquent or derogatory on your credit report. Delinquent accounts are usually past due, while derogatory accounts may have a more serious mark against them, such as a bankruptcy or a foreclosure. Either way, lenders don't like to see these on your report, so do whatever you can to keep your accounts in good standing. See if you have any negative marks.
5. Credit Inquiries / Low Impact
Be sure to clarify if your credit score will be subject to a soft inquiry or hard inquiry before you submit your information for credit. Soft credit checks are pretty common and occur when a person or company checks your credit report as part of a background check. This has no effect on your credit in any way. Hard credit checks can lower your credit score a few points. These are commonly done when you finalize an application for a loan, credit card, or mortgage, and the lender needs to check your full credit report before making a lending decision. See your recent credit inquiries.