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How to Boost a Mediocre Credit Score

Jul 11, 2005 | | Comments Comments Off

Q: Please tell me how I can improve my credit score, which is in the marginal range around 640. I’ve never had any judgments or defaults. My late payments usually are because of carelessness, not outright delinquency. I have adequate income, and I always pay my mortgage and car loans on time. I’d like to take charge of all of this so that I am not treated like a pariah when I apply for a lower-rate credit card. Can you help?


A: To get the best rates and terms on credit cards, you’ll need credit scores of 720 or above. You won’t get there if you continue to make late payments because the credit-scoring formulas treat overdue or missing payments as a sign that you’re about to default on your debts.


You need to set up some kind of automatic payment system so that your bills are covered, no matter what. Fortunately, you have a couple of good options.


Many utilities, lenders and credit card companies will happily set up automatic debit arrangements so that your payments are taken automatically from your checking account each month. (If you don’t want to pay your entire balance on a credit card, you can arrange for the minimum payment or some other set amount to be taken out each month.) You’d be smart to sign up for overdraft protection for your checking account, just in case one of your payments goes through when you don’t have sufficient cash to cover it.


You also could set up recurring payments using an online bill-payment system. This works well when your payment is the same amount each month; if the amounts vary, you’ll need to set up some kind of reminder system so you don’t blow the deadlines. Many online bill-pay systems have such reminders, or you can use one of the many free e-mail reminder services available on the Web.


You’ll also help your score if you pay off those credit card balances and use less than 30% of your credit limits on any card. This can be tough if you have a high balance, but it’s the smartest approach to take — for your credit score and your overall financial situation.


Combine these steps with on-time payments, and you should notice a positive change in your score within a few months.

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