Tuesday, August 11, 2009

Improving Your Credit Score

Hey all! I came across this wonderful article, courtesy of Real Simple, and I definitely wanted to pass it along to you. I can't seem to find the web article, but pick up the September issue for the complete list of 8 ways to save your credit score. Among what I thought was most interesting:

1. Use your credit cards - within the past year, inactive credit cards have had limits lowered or even canceled because they don't make a profit for the credit card companies. Using your card responsibly and then paying it off every month is a good way to improve your score. Obviously, spend reasonably and within your means. There's been a lot of debate whether or not to use credit cards, but here's something else to consider when you're deciding how to pay for things.

2. Don't close cards when they've been paid off - according to the article, 15% of your credit score is determined by the length of time you have been using credit. Canceling a card you have a long history with will shorten your credit history and thus, negatively impacting your score.

3. Pay off the lowest balance card first - this seemed counterintuitive to me, as paying off a card with a higher balance (therefore higher fees) will save you more money. Since a lower balance will be easier to pay off, focus your attention there instead of dividing out your monthly payments equally among all of your credit cards. Continue to pay the minimum payments on all of your cards, but pay more on your lowest balance card. When that card is paid off, move to the next lowest balance card and use the money you were applying to the recently paid off card to your new balance.

If I find the article, I'll be sure to link to it so you can see the full list, but for other great articles on money, go to realsimple.com/moneyandmain

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