Tips to help boost credit scores and strengthen financial footing

It is a three-digit score that can shape your financial future, whether you plan to buy a new car or qualify for a reasonable mortgage loan to buy the home of your dreams. Your credit score is a determining factor in whether you obtain financing and at what cost, and there’s never been a better time to clean up your credit history and boost your score.

The first step in improving your credit score is to know where you stand. Your credit records have been reduced to a three-digit score commonly known as a FICO, or Fair Isaac & Co., score. Each of the three major credit bureaus (TransUnion, Experian and Equifax) have assigned a score that shows how likely you are to pay back a loan on time – the higher the score, the lower your presumed risk of default.

By law, you may obtain one free report annually from each bureau online By accessing your credit information one agency at a time, you can get a free credit report three times a year. Once you know your FICO score, you can work toward improving it. But improving your credit score can require time and commitment. Here are some valuable tips to get you started:

– Pay your bills on time. Your payment history, including late payments and foreclosures, can count for one-third of your credit score. Accounts more than 60 days past due will be indicated on your credit report.

– Check your credit report for errors. Removing errors, especially those negatively reflecting late payments or unpaid credit is one of the easiest ways to improve a credit score.

– Reduce your balances. One-third of your FICO score depends on the total amount of balances you owe versus your total credit limit. Try to keep your balances less than 80 percent of your credit limit to maximize your score benefit.

– Keep older credit lines open. Having a long history of active accounts indicated to lenders that you are a good credit risk. It also accounts for 10 percent of your credit score.

– Use credit, but use it responsibly. This includes having credit cards and installment loans with timely payments. Accounting for 15 percent of your score, a balanced account, including a mortgage payment can help homeowners boost their score.

– Avoid new credit. Opening new credit will lower your average account age. In addition, the number of new applications counts for 10 percent of your score. Under the Fair Credit Reporting Act, you may limit “prescreened” offers by
removing your name from nationwide lists.

– Check regularly for identity theft. Agencies may only provide your information to those with a valid need, such as a creditor or insurer.

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