Money Makeover Tip: Improve Your Credit Rating

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By The Money Coach
April 05, 2010 @ 03:45 pm

What is a credit rating and how can you improve yours? Listen up to the Money Coach.

Credit ratings are a very important part of financial planning that few people care about as much as they should. If you want to apply for a mortgage, take out a car lease, be approved for an apartment or house rental, apply for another credit card or take out a business or personal loan . . . the better your credit rating is, the more options you have. Here's how to build yours up:

1. If you don’t already have a credit card, apply for one. You might be able to get a credit card easily through your bank if you have a good history with them. Many credit card applications often come through the mail, but be careful to check the fees and/or interest rates before you apply for them. Don’t open too many accounts at the same time-- one or two is just fine.

2. The most important thing you can do to raise your credit score is to pay off your credit card balance in full each month! Doing this alone will increase your score tremendously, as one-third of your credit score is based on this payment history.

3. If you do carry a balance on your cards, make sure you have a card with a 0% interest rate or one that is as low as possible. Be sure the balance is paid off before the rate increases significantly.

4. If you are using a credit card from your bank, make sure that you are taking advantage of their relevant payment services. You can often set up a system where the bank automatically takes the money out of your checking account so your card will be paid in full, which guarantees payment on time without extra fees. You can also monitor your monthly balance online to be clear on where your money is going, and to prevent overdraws on your account. Some banks also offer free online banking, bill paying and checking without a monthly balance.

5. Go to www.annualcreditreport.com to get a free copy of your credit report each year.