5 Tips for Increasing Your Credit Score

Credit score happens to be one of the most crucial numbers for US consumers. This three-digit number is a very important one, especially when it comes to car loans, mortgage, and credit card applications. The interest rate you will pay for a loan will be based on this very number. The higher your score is, the better.

Credit scores are changeable, so if you have accumulated a certain number of credit score points, it doesn't mean that this number is fixed. Your score may drop or rise depending on the way you handle your loans and credit accounts. Want to boost your credit score? Learn how to increase it with simple steps!

• Pay credit bills on time. It sounds so simple but it happens to be rather problematic in real life. Some cardholders default on payments because they have a poor payment schedule. Keep in mind, you can move due dates on your cards by simply calling your issuer. Most cardholders are allowed to change their payment due date, but again, try to be on time with your payments.

• Cancel the newest credit accounts. If you think that you're carrying too many cards, or you just want to close credit accounts you don't use any more, you'd better cancel the newest accounts. The point is, when you close the old credit account, the history for that card is gone and it will be no longer included in the calculation of your score, and it will show up in your credit report.

• Keep your debt to credit ratio low. The debt to credit ratio is very important when it comes to good credit rating. This ratio is calculated the following way: the debt used is divided by available credit. It's recommended to keep this ratio low. If your debt to credit ratio is of 30-35%, it's ok and you will face no difficulties. If it's higher than 40%, you may have troubles when applying for a credit card. So, try to keep it low.

• Divide the cost of a big-ticket purchase among cards. When you plan to buy a large purchase, you'd better divide its cost among several credit accounts. If you are going to charge $5,000 on a single card, the chances are you will max out the card, and it's not the best idea for those who want to improve credit score. All you need to do is to split this purchase between your credit accounts so that the debt to credit ratio will be fewer than 50%.

• Pay down the balances. It is generally recommended to start with the highest-rate cards, but if your goal is credit score increasing, it would be smart to pay down balances on the cards that are closest to their spending limits. This will increase the amount of available credit and improve your utilization ratio.

By taking these simple steps, you can increase your credit score and thus apply for credit products with more favorable terms like low interest rates and minimum credit fees.

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