An adverse credit rating can have far-reaching repercussions for your life, from making loan or mortgage applications harder and leading to higher interest rates, to potentially keeping out job or apartment offers that you want or deserve. This guide is here to help turn around your credit score and get back on the right financial track.
Examine Your Credit Report
Reviewing both your credit score and report is the first step to improving your credit. Doing this annually or biannually ensures you stay aware of any changes to your history. Knowing your score allows for informed loan product applications or can alert you if someone has used your personal data fraudulently. A credit report gives a more in-depth view into financial life–it includes accounts held late payments on, charge offs, bankruptcies and more–so checking both helps provide insight into where you stand financially so that necessary steps can be taken to improve it further.
When checking your score and report, use only a trustworthy service that provides up-to-date data from all three bureaus – Experian, TransUnion and Equifax – which will give an accurate depiction of what lenders see when reviewing applications from you. Once you receive reports it’s essential that you inspect them closely for errors or signs of identity theft – any discrepancies must be brought immediately to creditors attention – before using this data to gain insight into how lenders perceive you before developing an actionable plan on how best to improve your overall credit health.
Pay Your Bills On Time
Payment history is one of the primary factors affecting your credit score. In order to improve it, be sure that all bills are paid on time – without exceptions! One late payment could be reported back to credit bureaus and cause irreparable harm. If managing multiple accounts is becoming cumbersome and complicated for you, set up automatic payments so nothing falls through the cracks.
Immediately address any past due accounts or collections to bring them current and ensure your debts are addressed in an efficient manner with debt consolidation if necessary. Negotiate with creditors to settle debt at less than what’s owed; or consider setting up a repayment plan – either way it is important that these accounts become current as quickly as possible and are addressed efficiently.
Reduce Your Credit Utilization Ratio
Your credit utilization ratio is one of the primary elements that impacts your score, so it’s crucial to maintain as low a ratio as possible. Your utilization ratio measures how much debt you owe relative to how much available credit you have-the lower this percentage is, the better! To reduce it further, pay down existing debt or expand available credit through opening new lines or asking for increase on existing accounts; making purchases over several months rather than all at once is also recommended; ultimately your goal should be keeping utilization ratio below 30% if possible.
Keep Long-term Accounts
Your credit history plays a large role in your score; the longer a loan or line of credit has been open, the better it looks on your report and shows lenders that you have established responsible financial behavior over time. As part of improving your score, strive not to close existing accounts unless absolutely necessary.
Following these four simple steps will help you improve your credit score. Remember to check your credit reports regularly for any changes or inaccuracies, pay all of your bills on time, reduce your credit utilization ratio, and maintain long-term accounts. With consistent effort and the right strategy, you’ll be able to see an improvement in your score over time.