How to Improve Your Credit

Years ago, a person with a poor credit history would have no problem obtaining most types of loans, despite how backwards that sounds. When the financial crisis started in 2007, banks and other companies smartened up and tightened the reigns on who they would offer a credit card or loan to. A person with poor credit these days might even find it difficult to enter into a two year cell phone contract. Therefore, improving your credit is one of the smartest moves you can make for you financial future, especially if your credit score and history aren't in the best shape.

Credit is Used for Many Things

Banks and other companies use a person's credit score as the basis for determining their eligibility for a loan, credit card, or other service. Unfortunately, they usually use a formula in which a person's score is simply brought up and then a computer will return an approval or rejection message. There is no arguing with the response because anyone who has a score lower than the required threshold will be denied whatever they are attempting to obtain. Other items and services a person might need good credit for include auto insurance, department store cards, business loans, and more. As you can see, good credit is extremely important in today's society. If you don't have the right credit score, then you won't be able to do too much.

Improving Your Credit

Luckily, most people should have no problem improving their credit history and credit score within a short time frame. A quick method to boosting your credit score is paying off any balances you have listed on your credit report, which include credit card bills and active loans. Soon after these balances are paid down, a person will receive a boost to their credit score. It is a good idea to keep your credit card balances under 40% of their limits because this will improve your credit score very quickly.

There are plenty of long term solutions to improving your credit history. First of all, bills need to be paid on-time no matter what. A single delinquency won't harm an individual's credit, but successive late payments will destroy their credit. Also, a person should avoid having too many credit inquiries on their report and negative information, such as bankruptcies and charge-offs, should be avoided completely. Protecting your credit history and score for the foreseeable future is a great idea because it will keep your credit rating strong. If you have a large credit limit, then you probably have good credit, so it never hurts to get an increase on the limits of your credit cards. Of course, you can't just go off and max out the credit card, but simply having the higher limits improves your credit.

Simple ways to improve credit include obtaining multiple credit cards and paying them off. On top of that, you can take out a small personal loan from the bank and make monthly payments on it until it is paid off. Opening a personal line of credit can also help because these types of things go on your credit report, so paying them off on-time will only improve your credit.

What to Avoid

Bankruptcies, charge-offs, and delinquent accounts will annihilate your credit history and credit score, so they should all be avoided at any cost. These negative marks on your credit report can remain there for as long as seven years, and most people with bankruptcies on their history will find it virtually impossible to obtain a loan or credit card. Therefore, a person needs to be financially responsible or they run the risk of ruining their credit for many years.

Wrapping Up Credit

Improving your credit score is fairly simple, as long as you don't have too many negative marks on your history. Good credit is a prominent requirement to obtain any type of loan, credit line, or service that involves monthly payments. Basically, a person will find life to be significantly more difficult if they have poor credit than if they have good to excellent credit. While it may not happen over night, your credit will improve over time if you are responsible. This involves paying bills on-time, taking on debt that you can handle, and being on financially responsible in general.