A good credit score is fairly important when you wish to contract a loan with a lower rate of interest. This statement is true for all kinds of loans, whether they are mortgages, car loans or credit cards. Also, the terms for repaying your loan are far less rigid if you have a credit score above 620. Many people, around 30 millions all over the United States, have credit scores below 620. If you are one of them, you may be interested in the following tips on how to raise your credit score.

1. Check your credit report

In order to find how your credit score is doing, you must get a copy of your credit report. Read it well and if you find any errors, ask for them to be corrected. Any error removed from your credit report may improve your credit score overall. For that, you must contact one of the specialized bureaus, like Experian, Trans Union and Equifax. For your knowledge, each one will give you a different credit score.

2. Do not let the bills pile up

The credit score is composed in a proportion of 35% of your payment history. So the best way to keep your credit score up is to always pay your bills on time. Only one missed payment can lower your credit score with 50 or even 100 points.

3. Pay your debt on time

Paying the debt for your credit cards on time will also contribute to the improvement of your credit score. Everything about how you pay your debt is well documented by the credit bureaus, whether you make your payments from month to month or you pay them a few days later than you should. Also, it is better to have a serious gap between the value of your debt for the credit cards and your total credit limit, as lenders will see this as a good proof that you present good guarantees and that you pay your debt on time.

4. Leave open your old accounts

Avoid hurting your credit score by closing your old accounts that have been paid off. If you do that, you may cause some damage to your credit score, because it will make any balance you have look larger in credit score calculations and it cause a shorter credit history, which can make for a bad sign in the lenders’ eyes.

Many people choose old and paid off accounts because they want to prevent identity theft. If you are one of them, then you should know that your credit score will be lowered only a little by these actions. But it is good to know that by keeping them open, you can raise up your credit score.

5. Avoid becoming bankrupt

Becoming bankrupt is the worst thing that can happen to your credit score. Bankruptcy actually destroys your credit score, by lowering it with 200 points or more. What is more important, it is very hard to come back from as a bankruptcy will appear in your credit records for 10 years. Then, with a bad credit, you will only be able to contract loans with bigger interest rates. This means that only lenders interested in clients with bad credit will offer you loans and they will charge you big for this.

If it is too hard to manage your debts, payments and bills, it is advisable to search for professional help. Avoid bankruptcy and you will avoid a bad credit and all the trouble that comes along.