Low Debt is Good, But a High Credit Score is Better

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The higher your credit score, the better loan terms you will be offered when it comes time to buy a new house, car or other major purchase. Having a high credit score means having the freedom to know you will be able to get approved for financing when you are in the midst of an emergency.

So now that you know how important it is to have a high credit score, what are some of the things you can do to pull your own score over to the excellent side of things? Much like a dieter who needs to face the scale in order to have a starting point of reference, you need to obtain a free copy of your credit report to know where you stand before you can go about trying to improve anything. Once you have your report in hand, the following five tips will help you get that score up if you need to.

Make Sure Your Credit Report is Accurate

There are a surprisingly high number of inaccuracies on credit reports simply because consumers do not take the time to report wrong information. You should pay particular attention to duplicate accounts, an incorrect address, date of birth or social security number, accounts you don’t recall opening and negative information being reported that is more than seven years old.

By law, credit reporting agencies can only keep information about your payment history with various creditors on file for seven years, whether negative or positive. The exception to this is bankruptcy and other public records, which can be kept on file for up to ten years.

Report Errors to the Credit Bureau

If you notice an account that is still being reported late even though you have paid it, report this to the credit reporting agency. They are required to follow up with the creditor to verify the status, and to remove the negative mark if it can’t be proven. All types of errors should be reported to insure that your information is accurate when you need it to be.

Be Timely with Your Bills

Paying your bills on time each month is key to having a higher credit score. If you tend to forget to mail payments, set up bill pay or automatic withdrawal to make sure that every creditor is paid on time every month.

Watch Your Debt to Income Ratio

It doesn’t reflect well on you if you are maxed out on all of your credit cards and are now seeking even more credit. This is refererred to as debt to income ratio, and most lenders like to see a rate lower than 36 percent. If yours is higher than that, start by paying off your smallest bill first and continue until you have eliminated all non-essential debt.  Your accountant can help you with keeping your finances in good standing.

Keep Accounts Open

Even if you no longer use a credit account, by keeping it open you will raise the amount of available credit. The more available credit you have, the higher your score will be.

If you hire an accountant or bookkeeper you can often save yourself considerably on your taxes.  It’s definitely worth the investment to keep your credit in good standing.

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