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5 Smart Ways To Improve Your Credit

By Elizabeth R. Elstien

A credit report contains important information on your spending and payment history needed to determine if you are a good risk for obtaining credit cards or home, school or automobile loans. The highest score is 800. Banks and other financial companies, utility companies and insurance companies may gain access to your credit report often through signing an application granting permission or other agreement. Use these five ways to get smart and improve your credit.

1. Monitor Your Credit

Monitoring your credit often ensures against fraud, erroneous charges and underreporting of paid off bills. Catch reporting issues fast to clear them up by checking all three credit reporting agencies (Equifax, Experian, TransUnion). Notice some unauthorized spending? Take action immediately and report the problem to the bank or credit-card company, as well as the police. Protect your good credit and monitor it often.

2. Be Consistent

Be sure to make payments on time for all bills and avoid erratic charging sprees. Paying late is definitely reflected on your credit score and drags it down, as does inconsistent amounts charged (e.g., normally charging $200 on a credit card but sometimes spending double that amount on the card). Even library late fees or other small bills left unpaid may be reported to credit agencies. Bill and credit card payment and spending consistency is a plus.

3. Pay Down Credit Cards

Keep the amount used at 10% of the maximum amount available. For instance, if the maximum amount to use on a card is $1,000, the preferred balance is $100. It actually improves a credit score to have the balance low than to pay it off in full. Talk to your credit card provider about paying multiple payments each month.

4. Avoid Numerous Credit Cards

Rather than have a number of credit cards, even if all have low balances, keep just a few cards. Pay off the ones with higher interest rates and cut them up, limiting the number of credit cards in your wallet to those few with the best interest rates. Too many credit cards with balances do not look good on a credit report.

5. Request New Credit Wisely

Each time you apply for credit, it slightly dings your credit score. Requesting a lot of credit over time could severely impact your score. Student loan, mortgage and automobile loan requests are considered different types of loans. Therefore, it is understood that you may need more than one at a time. Depending on the reporting agency, keeping your credit requests to a 14- to 45-day period may lump credit requests together for the same loan type to keep you from being dinged as often.

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