| 5 steps for improving your credit rating |
| |
| Slowly close out unneeded or unused
credit accounts. Most experts recommend carrying between two and four major cards.
But be cautious when canceling because closing accounts can negatively impact
your credit score, commonly called a FICO score. FICO considers the ratio of total
debts to total available credit. A good rule of thumb is to keep your revolving
debt to 50 percent of your available credit.
Remember that cutting up the card doesn't close out
the account. Here's a step-by-step
guide to smartly close out your account. Other tips:
Close out your newest accounts so that you don't lose your longer credit history.
Close out accounts slowly over several months. Verify that
all accounts you've closed are reported as "closed by consumer" for
the best report. Even if creditors offer to raise credit
limits, allow yourself only moderate credit limits. Keep
your balances low and avoid revolving balances.5.
Add stability to your credit file
You can also work to add positive
information and show stability in your credit file. You may
have been denied credit because of an insufficient credit file, yet you have credit.
Some creditors -- such as, travel, entertainment, gasoline card companies, local
banks and credit unions -- may not report your credit history to the credit bureaus.
You can try asking the credit grantors to report your account information and
monthly payment history to a credit-reporting agency. Not all will do that. So,
in the future, before opening a new account, ask if your on-time payments will
be reported monthly to a credit-reporting agency, recommends Myvesta.org. If
you have really bad credit -- perhaps even filed bankruptcy -- don't let your
credit status go dormant. "The faster you begin to re-establish good credit,
where you pay on time, every time," says Craig Watts, consumer affairs manager
of the Fair, Isaac and Company, "the faster you'll improve your credit score."
Build a solid credit history. A secured
credit card offers those with no credit and those repairing their credit this
opportunity. Shop around for the best deal available, but limit your applications.
Credit bureaus look at how many new accounts you've opened, and the number of
"inquiries" for new accounts that are listed. A sudden flurry of "inquiries"
results in a lower score, because many times consumers anticipating money problems
increase their credit lines. Inquiries made by creditors wanting to make "prescreened"
credit offers are not counted. Lastly, open a savings account
at your bank. This shows creditors that you are working to save and that you have
reserves to repay debts. | 
