Having a bad credit score can cost you literally thousands of dollars if you try to get a mortgage or car loan. The lower your credit score is, the higher the interest rate you will have to pay, if you can even get a loan in the first place. Thankfully, there are some things you can do to raise your credit score. Your score is made up of your payment history, outstanding debt, length of your credit history, recent inquiries on your credit report and the types of credit in use. The payment history and outstanding debt are the easiest areas for you to address to improve your credit score. Here are 10 things to look at:
Is your credit report accurate? Pull your credit score and have a look. If something is wrong, tell the agency, either by phone, letter, online through their website or by e-mail. They can often fix the problems, but only if they know about it and you follow up with them. The law is on your side – the creditor has 30 days to prove that their claim is accurate. If they can’t or don’t it is removed from your report. If you can prove it isn’t accurate, send the proof by registered mail and it will be removed. Even if you can’t prove it but it might be wrong, go ahead and dispute it. The creditor might not respond and you are further ahead.
Do you have accounts in collections or really past due? If so, you want to get them removed from your report. This will help your score immediately. You might even find information on your credit report that you are unaware of. Start by disputing the claims if there is a reasonable chance that your dispute might be successful. If that doesn’t work, contact the creditor or the collection agency directly. They may be open to accepted a lesser amount of money in exchange for getting some money now. Start at 50% of the debt you owe and go from there. Make sure that, as part of any settlement you reach, the creditor will remove the bad credit history from your credit report. If they don’t then you are no further ahead. Get the terms of the agreement in writing so that you have a record of what you have to do and what is promised if you do it. Doing this will definitely increase your score. Even if you have already paid off overdue claims, be sure to contact the creditor and ask them remove the item from the report. You can also dispute the item with the credit agency because the collection agency likely won’t respond since it has already been paid off.
Pay down your debt. If you need to improve your credit quickly and you have some extra money around, pay off some debt. Even if you are saving up for something, you might be better off paying off debt. By paying off debt, you lower your ratio of current debt to available credit limits. The lower this ratio is the better you look to lenders. This means that your credit score will be higher. If you are looking to get a large loan like a mortgage or car loan, paying down your debt to lower your credit score may save you more in the long run than you pay now, because you will get a lower interest rate because of your higher credit score.
Increase your credit limits. This is another quick way to improve your score. Call your credit card companies and ask them to increase your credit limit. Don’t use that extra credit. What it does is lowers your ratio of current debt to available credit, which again raises your credit score.
Cancel some cards. Some people have too many credit cards. If that describes you, cancel some. Ideally, you shouldn’t have more than four. A good ratio of debt to available credit is 40%. Don’t cancel cards if you will rise above this level by doing so. Also, if you cancel cars, cancel the ones you got most recently, so you maintain your history with the others.
Spread your debt among your cards. You are better off having some debt on many cards than a lot of debt on one card. Even if you will end up paying more interest, you will improve your score and get a benefit from moving your balances around so that all your cards are under their limits by about the same amount.
Have no debt or credit history? Get some. If you haven’t been using your credit you have been hurting your score. Go out and use your credit card for purchases and then pay it back right away. Take the low interest loan that your credit card company is always offering. Save the money and then pay it back before the interest rate increases. Once you show that you are responsibly using credit, your scores will go up dramatically quickly. You can start building your credit history at any time. It is never too late.
If you have bad credit, but a relative or spouse has good credit, get yourself added to their credit card. That doesn’t mean that you will use their card. What is does mean is that you will get credit on your credit report when they pay their bill. This is an easy way to create a positive credit history for yourself.
Pay your bills on time. This is such a simple concept, but people so often don’t do it. It is easy to forget to pay a bill until it is past due. Even if you miss the due date by a day or two it is a problem. Set your bills up to be paid by automatic withdrawal from your bank account or pay them online as soon as you get them. Paying your bills on time, or even better paying them early, will help your credit score. Even if you are only paying the minimum payments, paying early is a good thing. Since you can easily pay your bills online or at a bank machine, there is no reason why you shouldn’t do this. It will help.
Look at your credit report to find out when your lender reports. Time your payments so that they occur just before they report. That way the report will show that you have less debt than you actually do. This is a great, simple way to use your credit report itself to improve your credit score.