Credit scores are used by lenders and creditors to determine your creditworthiness and are based on whether you have made credit card or loan payments on time or if they are late or sporadic. Credit scores go up or down according to various factors, such as payment history, credit balances in relation to credit limits or lines and if collections or judgments, liens or bankruptcies have been filed with lenders. You can increase your credit scores by taking a few basic steps, having a bit of patience and a great deal of determination.
Step 1
Pay credit card or loan payments on time. Late, missing or partial payments wreak havoc on a credit rating and score and may result not only in extra fees, but it may initiate the lender passing off your account to a collector, which will show up on your credit report as a negative mark, and lower credit score rating for seven years.
Step 2
Pay more than the minimum balance whenever possible to keep debt down. Paying more than the minimum payments will increase the distance between the amount owed and the available credit. The wider that gap, the higher your credit score will be. Individuals who carry balances near their credit limits may have higher interest rates than those who don't, another reason to widen the gap. Liz Pulliam Weston of MSN Money suggests you keep balances below 30 percent of the credit limit on your credit card.
Step 3
Practice responsible credit card use. Large balances on credit card or revolving accounts can decrease your credit score, making it difficult or even unlikely that you will qualify for a credit line or loan for the near future. Curtail credit card spending whenever possible. Instead, save up for larger purchases.
Step 4
Check your credit report annually to reduce the chance of errors or misinformation noted on your credit report. The three major credit bureaus--Experian, Equifax and TransUnion--are required by law to provide consumers one free credit report every year. If you see a mistake or a negative item on your credit report, such as claim of a missed payment or a collection, or accounts that you closed that are still listed as open, dispute the item with the credit bureaus. List the items, provide evidence that they are in error (such as copies of payments, credits or correspondence with the company noting the error and resolution) and send copies to all three credit bureaus. They are required to resolve disputes within 30 days.
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