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Five Ways to Improve Your Credit

By Tiffany Raiford

When it comes to purchasing a home, your credit score is the most important figure of them all. It's the number that determines whether or not you can finance a home purchase (or a vehicle or anything else requiring a loan). Without a good credit score, it's difficult to become a homeowner. A low score could mean higher interest rates and fewer banks and lenders who are willing to work with you in terms of receiving a mortgage. For this reason, it's imperative you work hard to improve your credit score with some of these simple tips.

Check Your Report for Mistakes

One of the easiest ways in which you can improve your credit is to check your report for mistakes. It's not uncommon for credit bureaus to make mistakes on your credit, causing your score to drop drastically. For example, your agency might still have an account open that was paid off and closed years ago, showing that you haven't made a payment on it in that amount of time. Additionally, it can show other mistakes that lower your credit score. Check now and contact the credit bureau to have mistakes removed.

Pay Your Bills on Time

There really is nothing you can do that's more important than paying your bills on time. Each time you pay late, it's reported to credit bureaus, which drops your credit score. Even a payment received just one day late can cause your credit score to drop. Always pay on time. Set up reminders on your phone or calendar to help remind you. Additionally, try paying your bills online through automatic bill pay to help you stay current and on time.

Pay Off Debt

When you have more debt than income, it's difficult to have a good credit score. It's imperative you begin paying off your debts and keeping your revolving balances at less than 30 percent of your total credit. For example, if you have a credit card with a $10,000 balance, keep the balance at less than $3,000 at all times. If you can, pay your balances in full each month and avoid carrying a balance.

Stop Applying for Credit

It might be a big temptation to apply for that store credit card on Black Friday to save an additional 20 percent, especially since you're not going to use the card. However, just applying for it knocks your credit score down anywhere from 3 to 8 points every single time you apply for a card whether you use it or not. Avoid the temptation to save that additional percentage.

Don't Close Old Accounts

Closing old accounts is a bad idea when it comes to your credit score. The older the account the more credit history you have visible to lenders. If you must close accounts, make it newer ones. The older your good credit history, the better for your credit score.

Your credit score is something you should have in mind at all times. If you want to purchase a new home or finance a vehicle, it's imperative that you have the credit to do it. Without a good credit score, you'll spend far too much money on high interest rates, which could affect the type of house you can afford.

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