A credit score is a three-digit number that affects many aspects of your life. It's a summary of your credit history from the past seven years. A credit score tells potential lenders how creditworthy you are. A high credit score lets you borrow money at a good exchange rate. A low score can prevent you from getting a loan, buying a house or a car, getting a phone contract, or landing your dream job. A score of 700 or higher is considered good. Although you can't repair your credit history overnight, there are things you can do to raise your score quickly.
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Get a free copy of your credit report. You can request it once a year at www.annualcreditreport.com. It won't have your credit score on it, but it will have your entire credit history from the past seven years.
Check the report for errors. Even a small mistake can lower your score by 100 points or more. It can also be a sign of identity fraud.
Contact the issuing credit bureau with any mistakes you find. They help you correct them. Unfortunately, in some case, this can take years.
Pay off as much debt as you can. Start with any outstanding debt. A single missed payment won't have a significant effect on your score. A few missed payments can be devastating.
Check your debt-to-credit ratio. It's the amount you owe, divided by your credit line. The higher the number, the lower your credit score. Lenders don't want to lend to people who have maxed out their credit cards.
Close some old credit cards. Having too much available credit can make you a high risk. But don't close all of them. Keep one or two of your oldest credit cards. They help establish the length of your credit history. Creditors like to see that you've stuck with the same lender for several years.
Diversify your debt. Having different types of debt on your credit report is better than having just credit cards or just loans. Lenders like to see that you can keep up with payments on different types of debt.
Tips and warnings
- Creditors report your lending and borrowing behaviour to the credit bureaus once a month.
- If your credit score is very low, it can take a long time to get it up to 700. If you've filed for bankruptcy, it will take several years to repair your credit history, even if you're solvent.
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