There are many reasons for you might be interested in working to improve your credit score. A higher credit score can mean a lower interest rate when you apply for a loan (such as for Sterling 12 month loans, car or a home). A lower interest rate can sometimes mean hundreds of dollars in savings each month, all because you have a good credit score![no_toc]
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What your credit score consists of.
- Payment history consists of around 35% of your credit score. Do you usually pay you bills on time?
- Amounts owed consist of around 30% of your credit score. How much do you owe?
- The length of your credit history consists of around 15% of your credit score. How old are your credit accounts?
- Types of your credit use consist of 10% of your credit score. Do you have credit card debt, a mortgage, student loans, etc.?
- New credit consists of around 10% of your credit score. This is when you open up a bunch of new credit lines in a short period of time.
Here are my tips to improve your credit score:
Always pay your bills by the due date.
You always want to pay your bills by the due date, and you should be trying to pay more than the minimum payment each month so that you can start paying less money in interest each month. Remember that paying only the minimum means that interest will continually build up unless you have a 0% interest rate.
Keep your utilization rate less than 30%.
You need to watch your utilization rate as well. If you have a $100 credit limit, then you don't want to spend more than $30 on your credit card because that will affect your credit score.
Watch how many credit accounts you open.
Opening too many credit cards may lower your credit score because it will affect the age of your credit accounts.
Closing accounts don't mean that your credit score will increase.
The length of a history of your credit accounts is important as well. A credit card that you've had for 10 years (with no balance) can actually help your credit score. A new credit card will bring your credit history length down which may lower your credit score.
Do you know what your credit score is? Are you looking to improve it?