Improve Your Credit

The Insurance Information Institute (I.I.I.) recommends the following steps to improve credit scores:

1. Pay Bills on Time
Pay all of your bills on time. Late payments and delinquent accounts can have a major negative impact on credit scores, as well as giving creditors the right to increase your interest rates. Your goal should be to build a long history of reliable bill paying behavior.
2. Maintain Only a Few Credit Cards
Limit yourself to a maximum of three or four cards and keep your balances low. Use no more than 30 percent of your available credit at any given time and try to pay off your balance in full whenever possible.

If you decide to crack down on your credit card use by cutting up a credit card, go ahead and do it. However, don't close the account as this will raise your balance-to-credit-limit ratio and can have a negative impact on your credit score.

In fact, rather than closing unused credit card accounts don't open them in the first place. Resist the temptation to accept pre-approved card offers in the mail as this can have an adverse affect on your credit rating-a large number of new inquiries on your report will make lenders think you are planning to run up a lot of debt and can affect your score.

3. Don't Have Too Many Outstanding Loans
4. Maintain good credit by paying off outstanding loans as soon as possible.
5. Check Your Credit Report Annually
Look for errors and correct them as soon as possible. By law, you are entitled to one free credit report from each of the three reporting agencies once a year. You can request your free annual credit report from the only online authorized Web site, AnnualCreditReport.com or by calling the toll free number 1-877-322-8228.

Also, if you apply for credit and are turned down, you have a right to request a free credit report from the agency used by the creditor. If you would like additional information regarding credit scores, or would like to purchase your own FICO credit score used by most lenders, visit MyFico.com.

6. Deal with Financial Problems Quickly
If you find you are unable to meet your financial obligations, contact your creditors to see if you can negotiate a more manageable payment schedule. By contacting your creditors as soon as problems arise, you might avoid a "Bad Debt" report to the credit bureau. Also consider working with an accredited credit counselor.

The sooner you can begin to manage your credit and make payments on time the better your credit report will be over time. Information is available from the National Foundation for Credit Counseling or the American Center for Credit Education.

For additional information regarding credit, contact the Consumer Data Industry Association.

Article reprinted courtesy of the Insurance Information Institute. The I.I.I. is a nonprofit, communications organization supported by the insurance industry.

How is Your Credit Score Determined?

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