Top 7 Ways to Improve Your Credit Score

A credit rating is a measure of an entity's credit-worthiness, or probability that the person, company, or country will be able to pay back a loan. In the US, the statistical analysis of a person's credit score is a three-digit number, provided by credit reporting bureaus like Equifax, Experian and TransUnion. This score, along with the subject's credit history is used to determine, among other things, the interest rates offered to a borrower.

Credit ratings are also gaining in importance in other fields, having been used to fix lease deposits, compute insurance premiums, and as a factor in assessing employment suitability. Maintaining a good credit rating is thus important, not only because you plan to apply for a business loan. Here are some tips to strengthen your credit score:

1. Know your credit rating. Under federal law, you can avail of a free annual credit disclosure from each of the three bureaus, online at AnnualCreditReport.com. Getting your credit report more than once a year, however, will cost you.
   
   
2. Pay off your credit card balances. If you can't pay your balances off at least get them down to 30% or below your credit limit. If you're getting a loan, don't use your credit card for at least two months prior to applying. This is to make sure that your payments will be included in the report when the lender inquires about it, as creditors are sometimes late submitting their reports to the rating bureaus.
   
   
3. Speaking of late, don't be – with your payments, that is. It really hurts your score when you pay late, enough to eventually cost you hundreds of additional dollars in additional repayments per month when being assessed for a loan. Set up automatic bill payments to take care of this task for you.
   
   
4. Scrutinise your report. Does it have the correct personal information? Is it mistakenly reporting things like late payments and charge-offs? About a fourth of credit reports have errors serious enough to cause a lender to deny a person a loan. Contact the company in question through writing. Be careful to tell them exactly what the problem is and what you want done or you could lose an old, paid-off account line and inadvertently reduce your credit score.
   
   
5. 5) Cleanliness is next to godliness, but not when it comes to your credit report. Lenders want to see examples of a responsible borrower, and a too-clean credit history devoid of loans and payments isn't going to carry much weight with them. Try taking out a small loan and repaying it on time and in full to help improve your credit rating.
   
   
6. Keep one or two old credit accounts open to increase the ratio of credit limit available to existing debt balance, and keep them active through occasional use. Just make sure to pay the balances incurred.
   
   
7. Don't apply for new credit unless you need to. One, multiple inquiries by credit companies lower your scores. Two, new credit accounts reduce the age of the other accounts in your credit history, lowering the score further. If you've hired a broker to look for the best loans for you, however, then the multiple inquires count only as one, providing they are all done within a two-week period.

Mark Gwilliam, FCCA, uses his international experience to coach small business owners on how to run successful businesses. He combines his natural enthusiasm for sharing his knowledge with his proven ability to provide practical down-to-earth solutions for his clients. He has written several books and owns several companies which offer small business owners integrated business solutions. He writes several business articles in his weekly newsletters The Bizness and Successful Marketing Strategies. To read these and to have access to more tools and resources to turbo charge your business, visit his sites at http://www.mark-gwilliam.com and http://www.themarketingdude.com