ScoreBug

A Simple Way To Improve Credit Score

Although no consumers know the mathematical formula that credit bureaus used to calculate your credit score, it does not mean you will be at the mercy of these credit bureaus.

There are some actions that you can take to improve credit score. One of them is paying your bills on time. This is absurdly simple but it works very well.

When you think about it, it is common sense. When you pay your bills on time, your credit report will contain these records. When lenders review your credit reports, they will notice that you are very responsible with your personal finance and likely to be low risk to them.

Lenders such as banks and credit card companies want to give you money to spend. But they want to make sure that you can pay them back. If you pay your bills on time, your credit report will provide the proofs that the lenders need to approve your loan or credit application.

The lenders are taking a risk for giving money to you to spend and they know that there is always a chance that you will default on your repayment. However, if you pay all your bills on time, the odds are good that you will also make payments on a new debt on time, Just by looking at your payment history, the lenders can assume that your risk of default is low or high. This step alone is enough to give your credit score a boost.

Paying your bills on time also has another advantage. There is no late fee penalty. Financial institutions and service providers will charge you a fee if you do not pay your bill on time. In the event you miss paying your tax, you can get yourself into legal troubles as well.

Late fees and other financial penalties can make paying your bills off harder and they are unnecessary expenses. Whenever possible, set up automatic payments procedure for your bill payments so that you will not forget.

If you already have problems making your payments on time in the past, you will need start paying your bills promptly right away. It will probably take you a number of months of repaying your bills on time to improve your credit score but the effort will be well worth it when you see your credit score rebounds!

By: Stephen Chua

If you want to know more ways to improve your credit score, check out this credit improvement resource at NetCreditGuides.com. For more useful credit tips, drop by www.NetCreditGuides.com/blog and receive a free gift too.

You must know how your credit scores are calculated. All credit scores are generated by plugging the data from you credit report into software that analyzes it and cranks out a number. Not all three major credit-reporting agencies necessarily use the same scoring software. If this happens, you do not have to be surprised if you see that the credit scores they generate are all different.

Credit scores are sometimes called FICO scores because the software used to calculate a great number of credit scores were created by Fair Isaac Corporation or FICO.

Here are the percentages that you can base your FICO scores:

35% is your payment history
30% for amounts you owe
15% length of your credit history
10% types of credit used
10% new credit

The FICO or the Fair Isaac Corporation credit scores are the numeric values from 300 to 850 that is used to indicate your past credit habits. The score provides the lenders an indication of the risk they will take if they will loan you the money. The higher the score, the more likely you are to repay the loan when it is already due. Remember that the higher your credit score, the better the interest rate that you will get.