Friday Finance: 7 Ways to Boost Your Credit Score

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Many of us don't realize just how important our credit score is. If you're thinking about purchasing a home, taking out a loan, buying a car, or getting financing for a new business venture, then you might want to find out where you stand in the giant world of credit.

By Tamika Y. Richeson

Today's average consumer has a total of 13 credit obligations, 9 of which include credit cards. With this, how do consumers perform in the credit score report card? Experian found that the national average credit score is 692. Not bad, considering all of the hype around the economic crisis. However, there is room for improvement, especially if we have plans to recieve financing in the future. Consumers with scores above 700 have a good chance of the getting a low interest rate and consumers with a score of 706 or above get the lowest interest rates. To improve your score, here's what you should know:

1. Late Payments Lower Your Score: A score lower than 600 is often a symptom of a late payment history. The goal here is to re-establish a good record of on-time payments.

2. Obtain and Update Records: Keeping a record of your annual credit report will keep you informed of what the credit bureau is monitoring. Having a credit report in hand also prevents you from neglecting an institution because you didn't realize you owed them. You will also be able to dispute negative claims that are inaccurate.

3. Maintain a Reasonable Balance: Avoid outstanding balances that maximizes the amount of credit available. What do I mean by this? Stop using all of the credit available to you because it can lower your score by up to 70 points. Use enough to establish your credit but be reasonable enough to know your limits and what you can really afford to pay off on time.

4. Pay a little more: You may also want to consider paying a little more than the minimum payment which will appear favorably on your credit report.

5. Make History: Unfortunately, building your credit score takes time. The credit bureau is often unable to determine your credit score because there is not enough payment history that tells the lender that you are a responsible money manager. With no credit history, the lender will often view a consumer as a higher risk.

6. Don't Go Overboard: The key here is not to open a bunch of credit cards and start using them. Determine what type of credit would make sense for your financial lifestyle and be diligent in using a reasonable amount and paying it off on time. New accounts lower your average account age by up to 10 points, so chose wisely.

7. Communicate: If you ever have trouble making payments on time, call your lender or creditor and make them aware of this. You can work out a modified payment that is more manageable as opposed to making no payments at all and risk getting a lower credit score.

To view your credit score for free go to www.myfico.com, the catch is that you have to sign up for a 30 day free trial. You will have to remind yourself to cancel the free trial before the 30 days is up. You can end your 30 day trial by sending an email to This e-mail address is being protected from spam bots, you need JavaScript enabled to view it and include your decision to cancel and your name, address and phone number. However, My FICO is a great resource to sign up for if you want to monitor your progress in increasing your credit score for a monthyl fee of $9.00.

To access your Annual Credit Report, go to www.annualcreditreport.com which is the only authorized source that allows consumers to access their annual credit report for free. Getting a copy of your credit report will keep you informed about your payment history, negative and positive aspects of your report and will allow you to view the information that lenders look at.

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