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Improving Your Credit Score

December 10, 2012
Plain English Version

The news is good. You do not have to be rich to get a good credit score. A high credit score means you qualify for the lowest interest rates on auto loans and mortgages and the best deals in credit cards.

Your credit score is the result of your actions as a consumer. Credit score companies compile the information and send it to the people who decide how much of a risk you are if they extend you credit.

Here are the ways to improve your credit score.

It takes debt to have a good credit score. The top scorers have about four loans or credit cards on which they owe money. Having debt and making regular payments shows creditors you are a good customer.

Have a good amount of unused credit. Do not use all your credit. The rule is to use only 30 percent or less of the credit available to you. If you do not have much credit available, you might get another credit card and not use it. Or, you might ask your credit card company for a higher credit limit. Even asking questions about your credit can sometimes lower your score in the short-term.

Be middle-aged or older – or attach yourself to someone else’s account. Younger people do not have long credit histories. Opening a joint account with parents or relatives with good credit can give you a better credit rating.

Perfect payments are the best way to go. This is the most important thing you can do. Virtually all of the people with the best scores never miss a payment. If you are late 30 days or more it shows you have trouble paying your bills.

Experts say you can rebuild you credit score over time. However, as they say about everything, an ounce of prevention is worth a pound of cure.

The Wall Street Journal

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