How to Improve Your Credit

Important Things You Can Do

If you have a low credit score, you probably already realize the effects it can have on your financial situation. You may have been denied a loan or new credit. The credit cards you do have are likely to have very high interest rates. This can cost you thousands of dollars in added interest payments over the years. Perhaps there was a new job you were seeking, but your credit history kept you from being hired.

The truth is, improving your credit score is a slow and sometimes painful process, but it can be done. You need to remember that you didn’t get into financial trouble overnight and getting out of it will take time and patience. But the rewards of having a good credit score should be motivation enough to begin the process of improving your credit.

The first thing you should do is get a copy of your credit report and go over it carefully. Mistakes do happen and occasionally incorrect information is reported to the credit bureaus. It’s your responsibility to check your credit report and dispute any inaccuracies to the credit bureau.

Reduce the amount of debt you owe to your creditors. This is the painful part of improving your credit. You need to bring down the outstanding balances on your credit cards and this means not adding any new debt to your existing accounts. Look to see which cards carry the highest interest rates and pay more towards them. Your lower interest rate cards can be paid the minimum amount due for a while.

It can’t be stressed enough that the most important thing you can do to improve your credit is to pay your bills on time, each and every month. It sounds simple, but just one late or missed payment can undo all your good attempts at improving your credit. The longer you pay your bills in a timely manner, the sooner your score will start to increase.

Remember that older credit problems count less than current ones, so a poor credit history won’t haunt you forever. But most information stays on your report for seven years. A bankruptcy is listed for ten years.

If you are truly having problems making ends meet, get in touch with your creditors directly and explain to them your financial situation. The economic recession has affected millions of people over the past few years and many creditors will be agreeable to discussing payment options with you. The worst thing you can do is ignore your financial problems. They won’t go away. You need to confront them head-on.

You might consider seeing a certified credit counselor. Creating a budget is all well and good, but if you can’t stick to it, it’s not going to help you get back on the road to financial stability. Credit counselors can help you set up a financial plan and give you suggestions for staying the course.

Don’t move your debt around. Your number one priority should be to pay off your debt, not spread it out over many different accounts. Lowering the total amount of money you owe to creditors is a proven way to improve your credit score.

Closing unused credit card accounts won’t raise your score and in reality, older accounts can actually improve your overall score. It’s also important not to open any new accounts while you are trying to improve your credit score. Many creditors see this as a sign of someone having financial difficulties.

Improving your credit score is more than just finding errors on your credit report and having them removed. It is a process which takes time and effort on your part, along with patience and discipline. By making your payments on time and using your credit cards and loans wisely, you will eventually be back on solid financial ground.
To find the answers to more of your credit questions, click on Credit FAQs.