Improving Your Credit Score

7/10/2007

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Are you one of the more than 30 million people in the U.S. with a low credit score (below 620) making it difficult to obtain loans and credit cards? The Better Business Bureau (BBB) has advice on how you can improve your credit score.

Your credit score is a number derived from your credit report—essentially the record of your financial behavior. It contains identifying information about you and indicates how responsibly you have used credit and met your financial obligations.

Establishing and maintaining a good credit record is very important. A low credit score could deny you access to a credit card, mortgage or car loan, insurance, electric and telephone service, an apartment rental unit or even a job. And, it could result in thousands of dollars a year in additional finance charges that you’ll have to pay.

What's more, a poor credit record can follow you for years, and even decades. Late payments, defaults and other flaws can generally remain on your credit report for up to seven years; a bankruptcy can remain on your report for 10 years; and unpaid tax liens can remain for up to 15 years.

People with excellent credit files receive the best interest rates and payment terms from lenders. If you practice good credit behavior, you should have no problem securing credit when the need arises.

The BBB offers tips on how to improve your credit score:

  • Review your credit report at least annually. Errors on your credit report could hurt your score. The Fair Credit Reporting Act (FCRA) requires each of the nationwide consumer reporting companies – Equifax, Experian, and TransUnion – to provide you with a free copy of your credit report, at your request, once every 12 months. Only one Web site is authorized to fill orders for the free annual credit report you are entitled to under the law –www.annualcreditreport.com.

  • Pay your bills on time. While it may sound like simple advice, many people let late payments tarnish their credit score.

  • Don’t ignore traffic tickets. Tickets for simple parking and moving violations, and any other fines owed to your local government, can end up marring your credit score.

  • Keep your credit card debt and balance low. Aside from the impact credit card debt has on your score, even carrying a large balance relative to your limit can have an negative impact.

  • You can have credit cards…just not too many. New credit cards reduce the average age of your accounts and can have an adverse effect on your score.

  • Consider credit counseling. Credit counselors can help you get a handle on your debt. Just make sure you check out the organization with the BBB first – the BBB offers free Reliability Reports on nearly three million businesses.

    For more tips on how to manage your finances, go towww.bbb.org.

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