Best Ways To Increase Your Credit Score
A strong credit score allows you to borrow at affordable rates now and in the future. Lenders and creditors evaluate your willingness and ability to pay based on your credit score and history with lenders. When things are not right with your credit, securing financing for major purchases becomes a challenge. Fortunately, there are specific measures that you can take to improve your credit score. Doing so will show lenders that you are financially responsible and ready for a new debt obligation. The following tips are the best ways to increase your credit score.
It is very important to get all your credit accounts in good standing. That involves settling any overdue amounts and getting back on track with the initial repayment schedule. Demonstrating that you can pay on time is important with new lenders, despite any past mistakes. Once you commit to achieving good standing, your credit score will potentially improve in the coming months.
Work out the bad stuff
There is a big difference between bad debt and past due debt. Bad debt (debt you have stopped paying) is more likely to damage your credit than the debt that is past due. For example an old credit card balance or a medical bill that has since gone into collections. It is important that you put some effort into getting it off the books, whatever the origin of the debt.
Firstly, make a list of who you owe and how much is due. This information is readily available from your credit report. Secondly, contact each creditor on the list and offer to negotiate the balance downwards. In most cases, if a debt has gone to a collection agency, the creditor may be willing to settle it.
In other instances, if you keep trying your lender may also be willing to remove late fees and interest charges. Having a plan of attack when negotiating bad debts helps you to resolve them in an affordable way. With time, this will prove to be one of the best ways to improve your credit score.
Credit reporting errors are a common feature on individual credit reports. According to a 2012 study by the FTC, one in five people had an error in their credit report. Some of these mistakes could be minor, such as a wrong address or missing employer details. However, your credit score will take a big hit if account balances, past due dates and credit limits, are inaccurate.
Correcting errors on your credit report requires some effort. You should begin by submitting a request to one of the three credit reporting agencies; Equifax, Experian, or TransUnion. It should be in writing, submitted online or mailed via a certified letter. The communication should include any information that supports the dispute. The agency has thirty days to investigate the inaccuracy. Your credit report will be corrected if confirmed. Clearing any errors on your credit report is one of the best ways to increase your credit score.
Reduce your overall debt
Your credit score may be less than desirable because you owe a substantial amount to various creditors. One of the best ways to increase your credit score is by reducing your total debt. To positively impact your credit score, your credit utilization score should not be more than 30%. Maxed out credit card accounts or accounts close to their limits are the major cause of overutilization.
The credit utilization score is the ratio of the amount you owe to the credit lines that you have available. If your score is above this important number, make a plan to pay down your debt balances. A lower utilization percentage has the potential to increase your credit score significantly.
Some credit mistakes may stay on your credit report and negatively affect your score for an extended period of time. For instance, a bankruptcy may remain on your credit report and impact your credit score for up to ten years. Late payments and collection accounts can stay for up to seven years. This process will require some patience on your part. Simply keep your payments up to date, lower your utilization score, correct credit report errors, and reduce your overall debt.
Keep it simple
The need to improve your credit score can be a difficult task. However, the process does not have to be overwhelming. Focus on what you want accomplish, and start taking small steps to achieve it. This may be buying a new home, a car, or access to additional credit. Or get a small personal loan to help you establish an on-time payment history, which lenders are happy to see.
However, keep all your credit activity in check, especially by using any available credit in moderation. You should also make all your payments on time, even if it is just the minimum. Remember to maintain a close watch on your credit report, and fix any errors that may show up over time.
Taking these steps consistently and staying dedicated to the process will eventually lead to success. These are some of the best ways to improve your credit score and keep it in a healthy condition.
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