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Improve your Credit Score

Improving your credit score take time but it is not hard to do. Here are the steps you can take to get a better score.

1. Figure out where you stand
Before you begin do-it-yourself credit repair, you’ll want to get copies of your full credit reports from all three bureaus (Experian, TransUnion, and Equifax).
You can get your reports truly free, once a year, at www.annualcreditreport.com or by calling 1-877-322-8228. Other websites may claim to offer free reports, but the Federal Trade Commission (FTC) warns that these offers are often deceptive.You can also try free credit score tracking apps Credit Karma or Credit Sesame to get a sense of where you stand. Credit scores range from 300 to 850. A score of between 700 and 740, depending on the scoring method used, is considered “good credit” and usually enough to qualify you for the best credit cards, auto loans and lowest mortgage rates.

2. If you find errors, dispute them
The next step in credit repair is to dispute incorrect information on your credit report. Errors aren’t common, but they happen. Of course, sometimes bad credit is just your fault. You shouldn’t try to argue accurate information, but if you do see errors–even small ones—it’s worth cleaning them up. Here’s how:
Once you have the copy of your full credit report in hand, check your identity information (Social Security number, spelling of your name and address), and credit history. Review the list of credit cards, outstanding debts, and major purchases. If you see any mistakes or questionable items, make a copy of the report and highlight the error. Next, gather any information that you have to back you up, such as bank account statements, and make copies of these as well. This is important! The credit bureaus won’t do anything without proof. Write a letter to the specific credit reporting agency that shows the falsehood, whether it is Experian, Equifax, or TransUnion. Explain the mistake and include a copy of the highlighted report along with your documentation. Although certain bureaus now let you submit disputes online, it’s not a bad idea to send this letter by certified mail, and keep a copy for yourself. The reporting agency has 30 days from the receipt of your letter to respond. The Federal Trade Commission provides advice on contacting the credit bureaus about discrepancies. Here are the contact numbers and web sites for the three credit bureaus:
• Experian: 1-888-397-3742 – www.experian.com
• TransUnion: 1-800-916-8800 – www.transunion.com
• Equifax: 800-685-1111 – www.equifax.com

3. Stop the bleeding
Once you deal with any errors on your credit report, it’s time to ensure you’re not still spending more than you can afford each month. Why is this so important? It’s because there are only three simple things to do to repair bad credit:
1. Pay all of your bills on time
2. Pay down debt (especially credit card debt)
3. Avoid applying for credit
But before you can do these things, you need to make sure you’re not spending more than you earn—you need a budget.
To start, review your tax returns for the past two years to get a sense of how much money you actually take home in a year.
Subtract your regular monthly expenses (rent or mortgage, car payments, and home, car and health insurance) from your current income.
Next, estimate your monthly spending habits for other expenses such as gas, groceries and entertainment. Create a limit, based on your income, of what you can spend in each of the different categories of expenses. For example, if you tend to spend $400 a month on groceries, try to stick to $300 a month on groceries by making changes like buying generic brands, using coupons, and resisting impulse purchases.

4. Pay all bills on time going forward
If you want to fix bad credit, you need to start paying all of your monthly bills on time, period!
If you’re behind on any bill, get caught up as soon as you can. On-time payments are the single most important factor to your credit score. Simply put, your credit won’t improve until you can consistently pay every bill on time. One downside of this is that you don’t get credit for basic bills like your monthly phone and utilities.

5. Pay down credit card balances
Take charge of your credit cards by paying down their balances.
If you have any outstanding balances, make room in your budget to pay down these debts bit by bit, every month until they are gone.
Know your credit limits and make every effort to stay well under the maximum when charging items. That’s because credit bureaus analyze your debt load as a ratio. If you charge $500 on a card which has a $1,500 limit, you’ve used 33%, which is better for your credit score than charging the same amount on a card which has a $1,000 limit (50%), both of which are better than being maxed out (100%). Pay these credit cards down, but don’t cancel them. The total amount of available credit affects your score, even if you owe nothing.

6. Don’t apply for new credit
Finally, resist the temptation to open a new credit card, even when a store offers a discount on your purchase for doing so.
Each time you apply for credit is listed on your credit report as a “hard inquiry” and if you have too many within two years, your credit score will suffer. In general, a consumer with good credit can apply for credit a few times each year before it begins to affect their credit score. If you’re already starting with below-average credit, however, these inquiries may have more of an impact on your score and delay your ultimate goal of watching your credit score climb.

Working on these things now will ensure that you have good credit in the future.

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