Home Buddies - Houston Credit Repair Coach for Investors and Homeowners

How do I improve my credit score?

One of the first things you need to do to improve your credit score is to purchase your credit score and read those tips and explanations that are included in your score.
If you don’t know what is in your credit report, it is difficult to know the exact steps to take to improve your score by a specific point value. So how do you decide what to do about your score?

Certain things in your credit report have a particular percentage that is being reflected in your total score:

35% of your score comes from your payment history.
30% of your score is based upon the amount of debt owed.
15% of your score is related to how long you have had your credit account (length of credit).
10% of your score is looking at any new credit.
10% of your score is determined from what type of an account it is; revolving, installment, etc.

Here are some simple tips on how to improve your credit scores as much as possible.

Your payment history: Making payments on time every time and as agreed is an important aspect of an excellent credit score. If you have some accounts that have been paid late, get caught up on all past due payments. This will help to increase your score. Also, paying as agreed from there on will increase your score over time. There is no overnight quick fix. Making one or two payments in a row won’t do much, but six or seven months of consistent payments can result in a 40 or 50 point increase in your score.

The amount of debt you owe, available credit and balances: To improve your score in these areas you will need to have access to credit, but be sure to not use too much of it. In other words, if you have credit card accounts or a home equity line of credit with a total of $15,000 to $30,000 in available credit, you will want those balances to total at least no more than $4,500 to $9,000 (30 percent or less than the amount that is available).

Length and depth of credit: For some reason, our logic tells us that if we have an account that is not active, we should just get rid of it. We should just “close it out and get it off of the books”. However, we unintentionally lower our credit scores by closing old established accounts that haven’t been used in a while. Even though the account is not active, it counts for this component of your score. You want to keep at least one or two of your accounts that have been opened the longest.

New or recent credit: New accounts can show that you are currently creditworthy. If you haven’t opened an account in the past year, you might consider opening a new one. Don’t just open an account that you don’t need unless improving your score is necessary. And be sure to be financially responsible with your budget.

The type of credit accounts you have: Having a good mixture of installment and revolving accounts is what improves this area of your credit score. A mortgage loan, car loan and several credit card accounts would be an example of the accounts that would score well. Again, be sure to manage your financial budget with all of these.

Good Luck.

Barbara Partaka
Home Buddies