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News 5 Simple Ways to Improve Your Credit

5 Simple Ways to Improve Your Credit

Having a tidy credit report and a high credit score will make your life easier. How? The higher your credit score, the lower your interest rates will be, so you’ll save money on loans. And you want your credit report to be as clean as possible for potential employers, landlords, even your insurance company.

Your credit score is a snapshot of your credit history at a given time. The three-digit number — FICO scores range from 300 to 850 — is derived from the payment history on your credit report. Here are the factors you’re judged on and their weight in the score:

  • Your payment history — 35%
  • How much you owe compared with how much credit you have available — 30%
  • How long you’ve had credit — 15%
  • What kinds of credit you have — 10%
  • Applications for new credit — 10%

You’re entitled to a free credit report from each of the three major credit bureaus — Experian, Equifax or TransUnion — every year, and you can get that at annualcreditreport.com. You also can get your credit score on any of the credit-reporting bureaus’ websites for a small fee.

Check your credit report

Look through your credit report and check the accuracy of the information. If there are errors, write to the company that supplied the information and to the credit bureau explaining your dispute. If the company is in error, it must by law inform all three credit bureaus and fix the mistake.

Take out a small loan

This may seem like odd advice, but taking out a small personal loan from a financial institution like The Bank of New Glarus® and Sugar River Bank Branches and paying it back on time will improve your credit score in three ways: It will improve your credit mix, you’ll show that you’re responsibly paying it back, and the additional credit will improve your debt-to-credit ratio.

Keep your credit usage low

Try not to use more than 30% of your total available credit, including loans and credit card balances. And be sure to pay at least the minimum on time for every account you have every month. Using a credit card responsibly is one of the quickest ways to improve your credit score.

Get up to date on past-due bills

If you have overdue bills, get them up to date. Past-due bills will be reported to the credit bureaus, and this will hurt your score.

Pay down all your debt

To really improve your score, lower your debt. Make a list of all of your debts — credit cards, car loans, student loans, etc. — and how much the interest rate is for each debt. Attack the one with the highest interest rate first. That’s the debt that’s costing you the most, dollar for dollar. Pay the minimum on all of the others, and then pay as much as you can on that most expensive debt. When that’s paid off, move on to the one with the highest remaining rate, and so on.

When you know how to handle credit responsibly, your credit score will soar.

Ellen Cannon, NerdWallet

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