How to Improve Your Credit History

Somehow, your credit score happens to be most important number linked to you. And somehow, most of the persons fail to realize its importance. Its really important that you have good credit history, and in turn, good credit score. Simply put, if you have a good credit history, you are the king.



However, sometimes your credit history might not be good, or your score may be less. This would make you a less favorable borrower, and would ensure that you would have to pay high interest rates on your loans.



There are some really simple ways to improve your credit score, which would clearly help you in saving some money.



Keep Balances Lower than the Available Credit Limit on Credit Cards: This is a simple and effective technique to follow. Always keep track of your debt-to-credit ratio. Simply put, this ratio represents the amount of money you owe as against the amount of credit available to you. In case this ratio is too high, it would reduce your credit score. This is because it would show that you are reaching your limit, and might get into trouble repaying your debt.



Increase your Average Account Age: People generally have a notion that having lots of credit cards would improve your credit score. A part of this statement is true, having credit cards does improves your credit score. However, having lots of them might actually reduce it. When your credit score is calculated, it also takes into account your average account age. In case you have been getting lots of new credit cards, then your average account age would reduce drastically. Another point to take care is that do not close the account which is old. In case you have to close some account, close the relatively newer ones. But please keep in mind that a closed account does not goes away from your credit history, and is still reflected in your score.



Make Payments on Time: This is another simple to follow rule. Always make your payments on time. This includes all sorts of payments, such as bills, credit card payments, and loan repayments. In case you default on payments often, this is reflected very badly in your credit score. No one wants to lend money to a person who has prior history of defaulting.



Review Your Credit Report: You are entitled to take free credit report from each of the three credit reporting agencies once a year. Make sure you review your credit report often. Check that all the items are correctly put. It might be possible that there is a wrong transaction in your credit report, and it is messing up your credit history. You can contact credit agency for this, and ask them to remove this transaction. Best way is to take report from one credit bureau once every four months. So, you can keep track of your credit history on a continuous basis. Free credit report can be obtained from www.annualcreditreport.com



Keep A Good Credit Mix: It is always better to have a good mix of different kinds of credits available, like credit cards, installment loans, etc. This would ensure that your credit history covers all the aspects of different credits.



Do Your Rate Shopping for a given loan within a focused period of time: In case there are too many inquiries on your credit history, it might decrease your credit score. This is because it would show as if you are trying desperately to increase your credit lines. However, sometimes you might be shopping for loans, and contacting multiple financial institutions for that. Each one of them would check your credit history. However, if you complete this rate shopping within a specific period (generally 2 weeks), your score will not be effected by multiple inquiries. This is because it will be understood that you are shopping for one loan.



The above techniques and rules are directly recommended by the credit rating agencies. And are actually very simple ways to improve your credit score. It just needs a conscious effort on your part to ensure that you follow all these tips.