5 ways to improve your credit score

Pay off your bills as soon as they are due.

Your payment history is the most important factor when it comes to determining your credit score.  Because your recent credit history is more influential than what happened five years ago, it is important to get into the habit of making one off payments in order to rebuild your credit rating.  For those who may find this impossible because of difficult financial situations, then try avoiding late payments by putting as many bills due on direct debit as possible.  Such as mortgages, phone bills and utility bills by which companies/lenders are happy to take their payments directly from your account each month, which is another good way of improving your credit score.

Pay your debt and you will be charged less.

Lenders prefer to see lots of room between the amount of debt recorded on your credit cards and your total credit limit, in other words the more debt you are able to pay off, the wider the gap between the two, and the better your credit score will be.  Many people are unaware that credit scores don’t distinguish between those who carry a balance on their cards and those who don’t.  So charging less can also improve your score, even if you do pay off your credit cards each month.

Do not close down old, and paid off accounts.

It was the norm to be told to close down accounts that were not being used, but now we are being told that closing accounts will not improve your credit score, but may in-fact harm it!  So shutting down credit accounts actually lowers the total amount of credit available to you, and makes any balances you have seem bigger in credit score calculations.  If you close your oldest accounts, then it may even shorten the length of your reported credit history and make you seem less credit worthy.  However, some of you can afford to take little care concerning the effects of closing down an account because of limited use of credit cards and the fact that your credit score may already be high, so damaged caused is limited, which is something to bear in mind.

Get credit counselling if you need it.

If you find yourself bombarded with high interest debt, in danger of falling behind on your payments, or you already have, then it is defiantly worth working with a non-profit Consumer Credit Counselling Service in order to set up a debt repayment plan.  They are able to negotiate lower interest rates and help you to pay off your bills within a few years.  Many people believe that Credit Counselling can damage your credit score, but in reality this is untrue.  Any references to Credit Counselling are removed from your credit report after you have successfully completed your repayment plan, which means that there is no lasting reminder on your credit history, which is a good thing.

It is important to know the difference between Credit Counselling services and debt settlement firms that will damage your credit score and credit history.

Avoid bankruptcy at all costs.

Bankruptcy is the Great White Shark of the sea, worse than loans, collections and delinquencies.  It can instantly knock 200 points or more off the score of someone with otherwise a very good credit rating.  Recovering from bankruptcy can be tough as if your score is pushed below 620 credit becomes scarce and far more expensive.  You will also become hounded by high-interest lenders whom love recent bankruptcies, because they know the consumer isn’t allowed to file for credit again for another six years - plenty of time to squeeze out lots of high rate payments in the mean time, but on the whole main stream lenders will generally reject your application as you have a bankruptcy on record.