If you are planning to buy a new house or a new car, or if you are eyeing an insurance service, your credit score will definitely play a very big role. But before knowing how to improve your credit score, you should understand what a credit score is and what a good credit score is.

Before, lenders’ judgment was the lone factor if one deserves to receive a credit. With credit scores now, credit-granting process was made faster, efficient and more objective. Basically, a credit score is represented by numbers based on statistical analysis of an individual’s credit files or reports. In short, it will tell one’s creditworthiness. Lenders usually use different scoring systems with different scales to represent a credit score, which means that having a good credit score will depend on your lenders scoring system. Generally, though, credit score ranges from 330 to 830. People with low scores are absolutely a great risk to creditors. And a score above 700 already makes you credit worthwhile because it suggests a good credit management.

As you understand what a credit score is, you should also be aware of ways on how to improve it because a low credit score will cost you a lot of money too. So, there are suggestions on how it is being improved. Your credit score normally reflects credit payment patterns emphasizing more on recent information. First, pay your bills on time because late payments and collections can bring forth a negative effect on your credit score. Second, avoid high outstanding debts by keeping credit card balances low, as well as with your other “revolving credit”. Third, opening multiple credit accounts will not improve your credit score so apply and open one only as needed. And lastly, pay off your debts because people usually think of moving it around. In addition, you should be aware that closing unused cards will not improve a credit score.

Specifically, credit scores are entirely based on the information available on an individual’s credit information which means every action that may alter that information may cause a significant effect. Some people might have the idea that closing one or two of his revolving accounts would increase his credit score. But this is not the case because revolving accounts generally improve credit scores. Also, closing credit accounts will decrease the amount of obtainable credits. As you can see, making simple changes on your credit report can greatly affect your credit score. It is very important that you are aware of the risk factors provided with your credit score because they identify what factors available from your credit history are producing the greatest impact.

But if you come to think of it, the most important contributor to having a good credit score is paying your bills on time even if the debt you owe is only a small amount. If you do not have negative information on your credit report such as late payments and bankruptcy, then all you need to do is pay your bills and wait because credit scores improve over time.

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Category: Finances
Keywords: credit score, improve credit score, boost credit scores, credit score advice, fix credit score