UA Matters: Three Tips for Improving Your Credit Score
- Pay your bills on time – preferably early. When you incur debt, there is nothing the debtor wants to know more than whether you will pay back the debt as agreed. Your payment history with other creditors offers a fantastic way for would-be lenders to gauge this, and this is the most important factor in determining both your personal and business credit scores. Thirty-five percent of your personal credit score is based on your payment history.
- Keep your balance at 20 to 30 percent of your credit limit. One of the fastest ways to improve your credit score is to pay off your debts. When you have a high balance on revolving credit accounts and installment loans, it can indicate you are spending more than you can afford and may be over-extending your current and future income. To manage your credit utilization ratio, you may need to open additional credit lines or request a credit line increase to lower the percentage of your credit in use to less than 30 percent of your total available credit. Closing unused credit accounts that have zero balances and are in good standing will not raise your credit score and may actually hurt your score by decreasing your available credit. Thirty percent of your personal credit score is based on your credit to debt ratio.
- Monitor your personal and business credit files to make sure the reports are accurate. Review your personal and business credit reports annually for mistakes, signs of identity theft, business fraud and outdated information. If you find errors in your business credit file, contact D&B to correct the information. If you find errors in your personal credit report, you may dispute the information and request the information be deleted or corrected. To do so, you should contact either the credit bureau that provided the report or the company or person that provided the incorrect information to the credit bureau. To contact the credit bureau, phone the toll-free number on your credit report or visit their website. To contact the company or person that provided the incorrect information to the credit bureau, look on your credit report, in an account statement, or on the company’s website for contact information for handling such disputes.
Warren is director of the Alabama Small Business Development Center’s Capital Access Program at The University of Alabama.
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