If you have bad credit which results in a poor credit score, it can affect more areas of your life than most people realize. It can diminish your chances of renting a house, increase the amount of deposit required for phone service, water service, gas service, even a higher deposit on your cable TV setup. To make matters even worse, it can diminish your chances of getting that new job or promotion.
There are many things you can do to improve your credit score. One of the very first things you should do is get copies of your credit report from the major credit reporting agencies. Studies have shown that the majority of credit reports for consumers have errors on them, and if the consumer does not report and dispute the errors, then the errors remain on the credit report. Having inaccurate information being reported, especially if it is in regard to a past due loan or an old account that has been paid off can lower your credit score. Your credit score could go up significantly just by finding and reporting those errors, and getting that bad inaccurate information removed from your credit report.
Obviously the best advice to raise your credit score as high as possible is to make all your payments on time, every time. Make that a habit that you do religiously every month. Try to keep your credit card balances between 20% and 25% of your total credit limit on each card, which will also help. Do not just move balances around via a balance transfer to other cards, since your total indebtedness remains the same. If you pay off a credit card, don’t close the account, since that will then remain as a valid credit reference, but leave it with a zero balance and just don’t use that card again. Avoid adding new credit card accounts, since each new account gives you the potential to max out that card.
On a mortgage loan, let’s see how a credit score affects your loan. If you want a 30 year mortgage loan and your credit score is above 700, you can probably get a 5.5% rate, perhaps even better. But if your credit score is 550, the best rate you will likely find is currently around 8.5%. On a $500,000 mortgage, that is about $1000 extra per month just in interest charges.