Credit Score - How to Improve Yours


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Credit scores hold a lot of importance today. Your credit score will affect you in many ways other than securing a loan. To improve your credit score first you must understand how credit scores work.

Credit scores are based on several factors including: Length of credit history, Payment history, and amount owed. When your score is calculated the various factors are given different weight. The most weight is placed on payment history at 35% but, for now we want to focus on the factor with the second most weight amount owed at 30%. The obvious way to improve this factor is by paying off as many of your bills as possible. I'm sure everyone understands that concept. Credit card debt has the most impact on this area. Creditors view credit cards as a good instrument to evaluate a persons control of their spending habits and budget. This is because credit cards offer a quick fix when you get the urge to purchase something that you cannot actually afford on the spur of the moment. Those who carry high balances on credit cards are deemed risky. So the first thing to do is start paying off those cards.

There is a second way to do this that is less obvious. Applying for credit cards. Yes, That's what I said. When you get a new credit card it comes with a credit limit on it, usually between $250.00 and $500.00 to start out with. If you have an extensive good credit history the limit may be higher. By securing a few credit cards you can build up your available credit limits. The key to this is you cannot charge anything on them. You should immediately take them and put them away in a secure location. You know, the out of sight, out of mind concept. As you acquire some of these your credit limits will begin to show higher balances of unused credit. This will gain favor in the eyes of the credit ratings and soon your credit score will climb.

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