How To Improve Your Credit Rating

The US economy is in crisis, families are struggling and along with this overall decline credit scores are dropping too. Scores that were good enough even two years ago are not up to the level anymore, so if you’re looking to get approved for a low interest credit card, a vehicle loan or even a mortgage it’s time to take a look at how your scores compare with the national average.

How is the national average calculated ?

So lets look at the numbers, well the national average credit score in the first quarter of 2009 was 676 – which according to the FICO scoring system is classified as average to good. How this number was generated was by taking the good and the bad credit scores from every city, all over the country. Once you’ve got all the numbers take the average and you have your national average. Minneapolis and Boston are cities that have the highest collective credit score of 705 and 704. Houston and Dallas came in at the other end of the spectrum with credit score averages of 650 and 652.

How to increase your credit score ?

Now that you know the national average, the question is, how does your credit score compare ? If it’s higher than 676, then congratulations you’re a lucky person. However if you’ve scored lower or if in the future your score drops below the average there are still things you can do to increase and build your score to position it above the national average. So lets take a look at some simple examples of how you can build up your credit score over a period of time.

• Ensure that all monthly bills are paid on time. This can increase your credit rating because positive history is being established with the companies you have contracts with. Paying credit card bills on time is essential, failing to do so can cause an unwelcome increase of the interest rates that you’re paying and when payments are missed your just going to sink deeper into debt.

• Reduce the amount of debt that you have, we cannot stress how important this is. The optimal amount of debt that should be present on your credit report is around thirty percent. When your debt levels are under this level you’ll be in good standing and your credit score will increase. Any amount over thirty percent and you’ll be penalised, so be sure to stay under the thirty percent limit.

• Avoid collection accounts. Collection accounts can deplete your credit score very quickly because of there associated with defaulted accounts. The problem is that even when a collection account has been paid it can remain on your credit history for some time, giving any lender an extremely bad impression on your credit track record.

To remove these strikes from your credit report negotiations can be made with the collection agency. The negotiations may involve you paying some money which isn’t exactly great but in the long run it will seriously benefit you and help you to drop that credit score even more.

Final Words

Using the above tips you can not only increase your credit score but hopefully bring it up to and above the national average. Any score above the national average will guarantee you better rates and terms on any lending you go after, be it credit cards, mortgages or even vehicle loans. So get start on improving your credit score because all of us can benefit from these savings in our current economic climate.