How to Improve Your Credit Score

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Understanding your credit score is half the battle. Most people simply do not realize that if you improve your credit card score by only 80 points, you can reduce your interest rate by 1.5% or more. Over the course of a 30 year mortgage, this could save you hundreds of thousands of dollars in interest.

Things You Will Need

Before you begin, obtain a free credit score report from one of the three major credit bureaus. Identify any errors, or misleading information, and send a letter to the reporting agency asking them to either prove it or remove it.

Step 1

Pay All Your Bills On Time - Every late payment is a negative indicator on your credit report. When you receive your bill, open it, mark the due date on a calendar and pay it well before the due date.

Step 2

Do Not Pay the Minimum Amount Due - Minimum payments are approximately 4% of your outstanding balance. When you pay only this amount you are wasting money. You are basically giving your hard earned money to the credit card companies. Find a way to pay more than the minimum amount. Sell some of your unused items on eBay or Craig's list.

Step 3

Never Skip a Payment - If you skip a credit card payment you allow the credit card companies to tack on interest and penalties. If you are trying to improve your credit score, do not skip a payment. Did you know that if you miss a payment to Company A, Company B can actually increase your interest rate even though you are still current with them. Unfair, but true.

Step 4

Keep Old Accounts Open - One of the major factors in determining your credit score is how long you have had credit with the various creditors. Even if you have a zero balance, keeping that card open will help improve your credit score. If, however, that card has annual fees go ahead and close it. It is not worth the hassle of trying to get them to waive that fee.

Step 5

Reduce Outstanding Credit Card Balances - Your goal should be to keep your available balance at around 65% of your card's limit. If, for example, your credit card has a limit of $1,000 keep your outstanding balance at no more than $350.

Trying to improve your credit score can be difficult. Credit card companies try and make things harder than they have to be simply to keep you under their control. Follow these steps and you will be well on your way to improving your credit score.