CardRates.com Guide: Fair / Average Credit
Is your credit looking a little tattered and tarnished lately? Want to polish it up and make it shine like new again? There’s no reason to feel ashamed or embarrassed about having temporarily neglected your credit score – life happens. With a little focus and discipline, your fair or average credit can be back up where it belongs.
Improving your credit score depends a lot on where it is currently and how much improvement you’re looking for. A fair or average credit score is somewhere around the 630 to 700 range in the FICO scoring system. This list of 7 tips is a good place to get started.
1. Get a copy of your credit report
Review these reports carefully for errors and file a dispute over anything that does not belong to you. Believe it or not, nearly one-third of all credit reports contain errors that contribute to a lower score. If yours does, this is an easy way to get an immediate bump up.
2. Lower your credit utilization rate
Another thing that can be holding your score down is your credit utilization, or the amount you owe compared to your total available credit. If this ratio is too high, it will negatively impact your credit score. If yours is high, there are two ways to go about lowering it. You can obviously pay down the amount you owe (if you have the resources to do that) or you can try calling your card companies and asking for a credit limit increase.
3. Pay off balances
If you have lots of balances on different cards, this can also be hurting your score. Try choosing the lowest balances and paying them off first. By reducing the number of active debt accounts, your score should improve quickly. Just don’t close those unused cards — they’re helping your score by keeping your available credit limit higher.
4. Don’t cancel your old credit cards
One of the metrics used in calculating your credit score is the length of time you’ve had the credit line open. If you no longer use the card, simply keep the cards in a desk drawer or your files. This will help to keep your debt to available credit ratio higher.
5. Diversify your credit
The types of credit you have also impacts your score. If credit cards are the only type of credit on your report, try opening a small installment-type loan. Believe it or not, doing this can actually improve your score.
6. Don’t apply for a lot of new credit at once
If you’re thinking this might be a way to improve your credit utilization, think again. Each new credit line triggers a hard inquiry of your credit report, and too many of these will negatively affect your score.
7. Pay your bills on time
Paying your bills on time every month is perhaps the best way to improve your credit score. Be diligent in paying your bills including your utilities, cable, phone, and so on. Late payments on any of these might be submitted to the reporting agencies and appear on your credit report.
Improving your fair or average credit score won’t happen overnight, but with a little work and discipline, it will happen. The benefits of having a good or even excellent credit score are worth the effort it takes to get there. Once your score is back where you want it, it’s easier to maintain over the long term.
Photo source: bp.blogspot.com
Editorial Note: Opinions expressed here are author's alone, not those of any bank, credit card issuer, airlines or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.