Two Ways To Improve Your Credit Score

Last week I decided to see how much my credit score had improved.  I was amazed to find that my credit score had jumped 77 points in the past few months!

Why Improve Your Score?

Your Credit Score is important because it effects every major purchase you will ever make.  In most situations it directly determins what interest rate you will be charged on a mortgage, car loan or credit card.  Even your car insurance premiums can be higher due to a poor credit score.

The average score in the United States is 710, but it can be as high as 850 or as low as 500.

Here is a typical mortgage example given by Fair Isaac, the developer of the credit score (FICO Score): 

The higher your credti score, the lower your mortgage rate will be.  For example, on a $216,000 30-year, fixed-rate mortgage:

As you can see in the example, a person with FICO credit score of 760 or better will pay $267 less per month for a $216,000 30-year, fixed-rate mortgage than a person with FICO scores below 640 – THAT’S A SAVINGS OF NEARLY $3,204 A YEAR. You can see that it pays – literally – to improve your credit score.

The Two Best Ways To Improve Your Score

According to the information I found when I logged in to MyFico the two best ways to improve my score were to:

#1  Make all of your payments on time.  This so crucial because most credit cards now charge a late fee of $29 - $45 in addition to causing harm to your credit score.  When you add up the cost of damaging your credit score plus the high late fees, paying your bills on time have to be a Top Priority!

#2  Systematically pay down your credit card debt over the next 24 months until you are only using about 10% of your available credit on a monthly basis.  If you are in serious credit card debt, you may want to read my article on how I got myself out of credit card debt.

Once you get your credit cards under control and improve your Fico score, you will find that dealing with your finances is a much more pleasant experience.  When you find yourself short on cash, make sure you first look to cut expenses before you "put it on plastic"!  In the past, I would would rationalize "charging it" by saying "my business will get better and then I'll be able to pay it off". 

Unfortunately, it's usually optimistic thinking that gets people in over their heads!

Additional Free Credit Resources:

Click Here to see how I got myself completely out of debt over the past two years.

Also, learn how you can get a Free Credit Report every 4 months for the rest of your life!  This is a goverment mandated program, so there are NO STRINGS ATTACHED!!