Tip! Pay your bills on time. That’s the first advice you’ll get when you’re looking for ways to increase credit score.
These days, good credit isn’t enough. Long term financial stability requires outstanding credit. The average person can save more money and get more options than they think just by improving their credit score. This is because the interest rates charged on various types of accounts such as mortgages, home equity loans, auto loans, credit cards and even insurance are dictated by our credit score. Aside from the few borrowers who fall into the "superior" credit realm, typically considered to be a 760 FICO score or above, there is plenty of room for credit improvement which can result in major savings down the road. Fortunately, improving your credit score can often be achieved in 5 steps or less.
Step 1: Pay your bills on time. Late payments have a huge impact on your credit score. In fact, payment history is the number one factor in determining your credit score. If you are behind on payments, get caught up and stay caught up. The longer you have a history of paying on time, the higher your score will be. There is a common belief that it’s okay to pay late as long as you are paying the balance in full. This is simply not the case. A late payment that paid an account in full will count against you the same as a late payment that paid only the minimum due. In addition, late payments on some types of accounts have more of an impact than those of others. For example, a late payment on a mortgage account will have a worse impact on a credit score compared to late payments on other types of accounts. Following is the prioritization of accounts in order of highest impact on credit score to least: mortgage loans, home equity loans, auto loans, installment loans, credit cards, and then other various account types.
Read more at Improving Your Credit Score in 5 Steps or Less
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