Everyone wants to improve their credit score to get a better loan, better interest rate on a loan or even buy a house and save money.  You can improve your credit score fast by focusing on the three main factors that affect your score the most.

The first thing you must learn and understand is the three things that factor into your credit score the most.  These three items are the ones that determine your credit score more than any other.

Item number one is payments or payment history.  This refers to how you have paid your bills over the years.  These include car payments, student loan payments, credit card payments, mortgage payments etc.  Your overall payment history is going to play a very important role in your overall credit score.  So if you have a habit of missing payments on your credit cards, mortgage, car loan, student loans it is going to have a negative impact on your credit score.  It is going to lower your score and the goal is to have as high a score as possible.  This means you are going to have a hard time getting a mortgage loan and a good rate for that loan.  So pay your bills on time.

Item number is two is amount used.  This refers to how much of your available credit are you currently using.  This is called your “utilization ratio” this is the term most used by financial institutions and it is a way of saying how much of your available credit you are actually using.  If you have a high amount of credit available and you are only using a small amount then your credit utilization is low.  This signifies to lenders that you do a good job managing your credit and you don’t overextend yourself and rely too much on credit.  Overall you want to have a low credit utilization ratio and that is going to have a positive impact on your credit score.  So try to keep your available balances paid down and low.

Item number three is the length of your credit history.  This is a very important factor and these three facotrs combined affect your overal credit score more than anything else.  The length of your credit history is in general how long have you been paying bills and how long have you had credit accounts open.  Many people make the mistake of closing credit card accounts when they have them paid off.  But if you have had the account for a long time you should keep it open even if you are not utilizing it.  For example if you close your oldest credit card account then you will shorten your credit history to the next oldest account and that could be years.  Also if your recent credit history is negative or not favorable and you close your oldest credit accounts which are positive this will have a negative impact on your credit score.

So in summary:

1. Pay your bills on time and do try not to go beyond 3o days late.
2. Reduce yur credit card balances so the amount used or the utilizatio ratio is low
3. Don’t close old accounts even if you are not using them as they will help maintain a long credit history.

This entry was posted on Friday, March 20th, 2009 at 7:17 pm and is filed under Credit Repair. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.