How To Increase Your Credit Score Ratings

Your credit score ratings can influence everything from whether you get a mortgage to whether you get a job. In fact, more and more businesses are using this number to determine how good a prospect you are. From insurance companies to cell phone companies, these numbers are increasingly coming into play. Here are five ways to increase your credit score ratings.

First of all, you should pay all of your bills on time every month. This may mean making a budget and sticking to it. Your debt payment history is the biggest portion of your credit score ratings. It makes up 35 percent of the formula. If you have a good credit score and you miss even one payment, it can knock your score down by 50 or even 100 points. If you have trouble paying your bills on time, consider putting your bills on automatic payment. Then, after all of the bills are paid, you know how much you have left for your “play” money.

Next, pay down your debts. Unless you use your credit card solely as a convenience and pay it off in full each month, try to find ways to use your credit card less. Part of the formula that determines your credit score ratings includes what is known as the “credit utilization ratio.” If you have less than 50 percent of your available revolving credit used, you are doing good. Anything more than that and it could be hurting your credit. So, decide that you are going to pay cash for more items and put a bigger portion of your budget to paying down existing debt.

Next, you should avoid the mistake of closing old credit accounts. Part of the credit score ratings is how long you’ve had credit. If you opened a credit card account in college but you’re not doing anything with it now because you have cards with better rates or rewards, keep the old college card open. It will show that you have had – and have managed – credit for a very long time. Shutting down old cards also lowers the total amount of credit that you have available which, in turn, lowers the credit utilization ratio.

If you are in trouble with your finances, my next tip is for you. You shouldn’t be afraid to go into credit counseling if you are in over your head. A non profit agency can negotiate with your debtors and set up a debt repayment plan that is actually feasible for you. While working with a credit counseling service used to affect your credit score, 3 years ago, Fair Isaac discontinued penalizing consumers for using these services.

Finally, if you are trying to increase your credit score ratings, do everything you can to stay out of bankruptcy court. One commentator called bankruptcy the “nuclear bomb” for your credit score. Bankruptcies stay on your credit record for 10 years. (Every other type of bad credit mark falls off after 7 years.) Almost always, people who file for bankruptcy end up with credit scores below 620. That means that they only credit they can get is from predatory lenders who know that the people can’t bankrupt again for another 7 years. They squeeze out high interest rates from these people.

So, if you are concerned about your credit, follow these 5 tips and you will soon have better credit score ratings.