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5 Ways to Improve Your Credit Score

February 16, 2016

By: Stacy Yu

When securing a loan, one of the most important things that lenders look for in borrowers is good credit.  Credit scores greater than 650 are considered favorable.  However, if your credit score doesn't quite make the mark, there are some simple things you can do to give your score a boost.

1. Monitor Your Credit Report Annually

Checking your credit score once a year gives you the opportunity to verify that the information and activity on your report is valid, and that your name and social security number has not been stolen to open new accounts. Contrary to myth, "soft pulls," or requesting your own credit report for the purpose of monitoring, will not affect your credit score. According to credit reporting agency Experian, "Fact: If consumers access their own credit reports, it does not have any effect on their credit scores. Reviewing a credit report results in what is called a "soft pull," or "soft inquiry," meaning it will only be seen on a personal credit report. When a consumer applies for credit, the lender will review the applicant's credit report, and a "hard inquiry" will be added. Hard inquiries are shown to other lenders because they may represent new debt that doesn't yet show on a credit report as an account. Hard inquiries can affect credit scores."

The Federal Trade Commission's Federal Fair Credit Reporting Act allows all consumers to receive a free copy of the credit reports from each of the following Credit Reporting Agencies every 12 months: Equifax, Experian, and TransUnion. Maryland state law also allows residents to receive additional free annual copies of their credit report from each of these agencies, making it possible to receive up to six free reports a year. To take advantage of the free FTC and Maryland state offers, order your credit reports through.  www.annualcreditreport.com.

2. Dispute All Errors on Your Credit Report

Carefully examine the line items on your credit report.  Look for items that look incorrect or suspicious.  Items, such as paid bills identified as unpaid, should be disputed and cleared from your record. If you find a credit card or loan on your report that you never opened, DISPUTE IT IMMEDIATELY. This may be a sign that someone has stolen your identity and/or social security number to open new accounts. 

Instructions on How to Dispute Errors on Your Credit Report

Repairing Identity Theft

3. Limit the Number of Credit Cards in Use

Reducing the number of credit cards in use will help improve your credit score.  If you are currently using more than one or two cards, consider paying off the cards with smaller balances.  If you frequently open new credit cards to take advantage of store discounts, minimize the number of new cards being opened at any given time.  Opening new lines of credit over a short period of time can lower your score. However, don't close the unused accounts. Having more accounts that are on record as paid in full, will improve your credit score.  If you do decide to close some accounts, close the newer accounts first.  The older the credit history on a single card, the better. If an older account is no longer being used, lenders will sometimes close the account, erasing the credit history that you built over time.

4. Pay Bills on Time

Paying bills on time is the best way to raise your credit score.  To make sure that bills are paid on time, set up an automatic payment schedule. MAFCU and other banking institutions offer online services to help you stay on top of your bills. Transaction fees may apply.

MAFCU Online Payments

5. Include an Installment Payment to Your Financial Mix

Lenders like borrowers who can manage different lines of credit. Include an installment payment to your credit mix. Mortgages, car loans, and other loans that require you to payback in regularly scheduled partial payments rather than in one lump sum fall into this category.  By including installment payments, you can demonstrate accountability by consistently making on-time payments.

 

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