There seems to be alot of headlines today around "fast ways to improve your credit score." Whether you watch TV or listen to the radio, it seems like there is always a new fast way to get your score higher to help you obtain a better loan. Katie Moore, GreenPath counselor from our Detroit office, recently answered some questions around credit scores.
How can someone improve their credit score quickly? Credit scores are difficult to improve quickly because the score really looks at how you handle credit over time. That being said, if someone wants to try and boost their score quickly, they should first make sure all accounts reported to the credit report are up to date and reported as “current” on the credit report.
Paying bills on time is the number one factor of your credit score. After paying bills on time, the next most important factor determining your credit score is the percentage of the credit limit used on revolving accounts such as credit cards. The less of the credit limit you borrow, the better for your credit score. It is important to review the amounts owed on revolving credit and pay them down as much as possible.
Why is it in a consumer's best interest repair their credit score?
It is in a consumers best interest to repair their credit score, if they are planning on applying for major credit, like an auto loan. The better your credit score, the better your interest rate.
Secondly, it is important to repair credit because your credit score is used to determine insurance premiums, used by a potential landlords or a potential employer.
What are 3 misconceptions about credit scores? The biggest misconceptions I hear are:
1) My credit score is based on my income. Income has no effect on credit and is not reported to the credit bureau.
2) The credit report is a “rap sheet” of things I need to pay. This is not true, the report shows positive and negative factors.
3) Pulling my credit report will hurt my score. It only hurts your credit score when you apply for credit (this is known as a hard pull). When you pull your own credit report it is a soft pull and does not affect your score.
What is the right mix of loans for a "good" credit score? You really don’t need to have a lot. Having a good mix is a small percentage of your overall score but ideally, you should have at least one revolving account (i.e. a credit card) and one installment account (i.e. student loan, car loan, personal loan, mortgage).
So, a few quick steps and some diligence can have you back the road to a good credit score. Click here to learn more and watch a short video offering additional tips.