How to boost your credit score

In our modern society, where most people pay for all their major purchases—from houses to appliances and cars—with loans, your credit rating is extremely important. The better it is, the more likely you are to get a good loan rate, and a few points’ difference in your rate can add up to a substantial amount of money over the life of a car loan or a house mortgage. Here are some inside tips on keeping your credit rating in tip-top shape:

1. Ask for leniency

The quickest path to a low credit score is making late payments on obligations such as your credit card, mortgage, or car payment. But if you’re coming up short this month and have been a good loan customer up to this point, there’s an easy solution: Call the lender and ask for an extension. Or ask if you may make a smaller payment this month. If you have a good track record, chances are you’ll get a free pass and be able to keep your credit rating high. But keep in mind that this is a onetime manoeuver designed to give you a little breathing room. You can’t call up month after month and expect to receive an extension from your lender.

2. Limit the number of credit cards you apply for

Want to watch your credit score go into a downward spiral? Never apply for more than two credit cards at any one time, says Stanley Kershman, a lawyer, author, and financial whiz based in Ottawa, Ontario. If a credit bureau sees that you have applied for three or more cards in a short period of time, the company will probably assume you’re in desperate need of cash—and desperate people do not make good credit risks. An even worse scenario, says Kershman: The credit bureaus think your identity has been stolen, which would also send your credit rating down the tubes.

3. Shred your financial statements

The one surefire way to see your credit rating head south is to get your identity stolen. Not only will it ruin your credit rating, but it’s going to take a lot of time, effort, and aspirin to restore your previously sterling credit rating.

So how do you avoid this mess in the first place? Don’t throw your mail away—shred it. This includes bank statements, credit card bills, and anything with financial information on it. Shredders range in price from about £20, for the most basic model, to more than £1,000 for one that turns your important financial documents into dust. In truth, a simple shredder is all you need. That’s because crooks—the bums that they are— always take the easiest route. It’s a lot easier to read a bank statement that was ripped in half as opposed to one that was shredded into 50 pieces.

4. Don’t be ruined by late payments

Did you know that if you miss a deadline on your car or credit card payment, your other lenders can jack your rate up to the default rate? This clause is called “universal default,” and you want to avoid it at all costs. If you read the fine print on your credit card agreement, you’ll read all about it. In a nutshell: If you are more than 30 days late on any payment, all of your credit card lenders earn the right to treat you like a financial pariah. Your low 0 percent or 3 percent credit card deal can skyrocket to a default of 20 percent or 30 percent. Remember, the credit ratings and reports will be seen by anyone who’s holding your credit, and if you’re making late payments for one credit card, you can be sure your other credit card companies are going to find out. Be sure to make your payments like clockwork.

5. Watch your credit account online

Identity theft is a multibilliondollar business now, and hordes of thieves are hoping you won’t do this. But if you check your account on the Internet religiously, you’ll spot any criminal spending quickly and you’ll be able to take action. Check your hard-copy statement or go to your credit card company’s website for information on how to get online access to your account.

6. Never use a P.O. box

Oddly enough, using a post office box can harm your credit rating. When credit rating companies see that your bills are headed for a P.O. box, they worry that you have either lost your home or that someone has stolen your identity. Both scenarios raise a red flag.