Before the financial crisis hit, 720 was considered a good enough score to get the best rates on auto loans and mortgage rates. While 720 is not a bad number, the highest credit score is 850, you can raise it up to a higher number like 760 which is the new number that lenders are looking for before giving customers the best rates, according to a report at MSN Money.
This Guide is Also Relevant to Individuals with scores 719, 718, 717, and 716. Nearby credit scores such as these will be able to benefit from this article.
Here are five things which you should do in order to raise your credit score before you take out a loan:
- Pay Off Old Debts– Even though old, bad debts can stay on your credit report for up to seven years, once you’ve paid them off, you can expect to see an increase in your credit score. If you’ve got a lingering $100 bill from a dentist that you saw ten years ago, just pay it off so that your credit report reflects that payment.
- Pay Bills On Time– One of simplest things to do, but one that most people disregard, is the importance of paying bills on time. Technology makes it easy for you to set up reminders to mail or hand deliver bill payments, or you can use the automated systems which most companies have in place for online bill pay. Have your payments set to be paid three to five days before they are due to ensure that they are processed in time. If you do choose to automate your payments, do be sure that there is money in your bank account so that you don’t overdraw your bank account and end up in a financial mess.
- Check Your Credit Report for Errors– Clerical errors during the reporting process can cause accounts to be incorrectly reported which can drag down your credit score. Take the time to request your credit report from all of the credit reporting bureaus– Transunion, Experian and Equifax–and look over it to make sure that the accounts are really yours. If there’s an error, dispute it immediately.
- Don’t Open or Close Any Accounts– An article at USA Today says that part of your score is based on the length of your credit history, which will be shortened if you close old credit cards that you no longer use. By the same token, don’t open any new accounts as that will bring down the average age of each account.
- Pay Down Credit Cards– You probably don’t have much debt if you have a 720 credit score, but do make it a priority to pay off credit cards, outstanding medical bills and the like. This will lower your credit utilization ratio, which can get high when you have unpaid accounts.
Use these five tips to get you started and you’ll be well on your way to achieving an excellent credit score and get interest rates in the single digits, rather than double ones. Remember, once you achieve a higher score, continue these practices so that your score doesn’t go down again. It’s wise to check your credit reports annually and pay off credit cards monthly as a way to keep your score at a high level.