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Wednesday, April 13, 2016

How to Understand and Improve Your Credit Score

Do you know your current FICO score? FICO scores are the credit scores lenders most often use to determine your credit risk. You have a credit score with each of the credit bureaus - Experian, TransUnion, and Equifax. Check each company’s credit report for errors. If you find any, dispute them directly with the relevant credit bureau.

How to Understand and Improve Your Credit Score
So what determines your credit score? Five components of your credit habits determine your credit score. Improving payment history and amounts owed will have the most dramatic effect on your credit score. Also length of credit, new credit and types of credit used all need attention to help you reach your long-term financial goals.

Payment History

Lenders award better credit scores to consumers with a responsible payment record. Did you know that Late payments stay on your record for seven years?

Do your best to pay bills on time. Try using payment reminders to meet your monthly due dates or, even better, setting up automatic payments. If for some reason you do miss a payment, catch up as soon as you can. The longer your record of on-time payments after a late payment, the more your credit score should improve.

Amounts Owed

Low credit card balances and ample available credit show lenders that your debt is under control. So reducing your outstanding debt is the quickest way to improve your score. A good tip is to pay as much as possible on your highest interest rate accounts first while keeping up at least minimum payments on the rest of your accounts.

Length of Credit History and Types of Credit Used

Lenders prefer consumers with an established credit history. If you don’t currently have any credit, start now.

Types of Credit to Improve Your Credit ScoreGood types of credit to use include credit cards and installment loans. Build a good history by opening a credit card and making small purchases and timely payments.

New Credit

Avoid opening too many new accounts too quickly as this will lower the average age of your credit history and hurt your score. Managing new credit responsibly can improve your score. However don't open unnecessary accounts just to boost your score as it's unlikely to have the desired effect.

Check Your Credit Report Yearly

Improve Your Credit Score - Check Your Credit Report Yearly

Set a reminder to check your credit report once a year. Once yearly you can request a free copy of your credit report from all three credit bureaus by going to

The Boehmer Team

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