Boosting Your Credit Score

It’s difficult to calculate exactly how much it costs you to have a low credit score, but if you get financing for a house, car or another major purchase, and if you use credit cards and take out loans, it’s safe to assume your low score is costing you thousands of dollars each year.

Creditors consider you a high risk, so they charge you much higher interest rates and hit you with harsher penalty fees when you make late payments. You’re also more likely to have annual fees for every kind of account. You can choose to resign yourself to this fate and keep paying creditors more money, or you can take control of the situation and turn it around. It’s not as complicated as you might think.

Get a copy of your credit report, ideally from all three credit bureaus.

You are legally entitled to one free copy of your report from each bureau, and you should take advantage of this. You can also sign up for online access to your reports, which will help you stay on top of any new additions to your report.

Look over your reports carefully.

See if there are any errors. It’s surprising how often a creditor reports something erroneously.

For any debts that are in bad shape, contact the creditors and try to negotiate with them.

You can likely get the amount owed reduced in exchange for making a quick payment.

Pay all of your bills on time.

This sounds obvious, but it’s worth saying here because late payments have a detrimental impact on your score. Set up auto-payments through your bank for all your regular bills. The longer your history with paying bills on time, the higher your score will be.

Be cautious when applying for new credit cards or loans.

You want to limit the number of new cards you have, while holding on to cards you’ve had for a while, if possible. If the interest rates on your old cards aren’t great, call the creditors to negotiate better rates.

The amount of credit you have available should be relative to your income.

It doesn’t look good if you make minimum wage but have several credit cards, and it looks even worse if those cards are carrying high balances.

Pay off your debts one at a time (while making the minimum interest payments on all of them), with as much money as you can spare each month. The best-case scenario is to have a few cards that you use sparingly, and pay off the balance every month.