Improving Your Credit Score

Having a bad credit score does not just impact your interest rates for credit cards and loans.  It can impact your insurance premiums, prevent you from getting a job, make it difficult to rent an apartment, and require you to pay high deposits when setting up utilities, like electricity and water.  Improving your credit score takes time, but can be done with some planning and free tools you can fine online.

To Improve your Credit Score, Check Your Credit Report! 

The first step in improving your credit score is to review your FICO score and your credit report.  You can check your FICO score (a score that is calculated from information included in your credit report, such as loan and credit card balances, payment history, and credit history) through a variety of different services (some credit cards even offer this for free for their customers).  Your FICO score is not on your credit report, so keep that in mind.  Review your credit report for accuracy.  If there are any errors, dispute those with credit card companies (you can do this online, over the phone, or by mail).  Experts recommend doing this via mail so you have a paper trail of any correspondence.  

Fix Negative Items to Improve your Credit Score

Now that you have examined your credit report and know what you owe and to whom, and disputed any errors, you can get to work on fixing negative items.  Get current on any past due accounts.  Paying on time is extremely important to improving your credit score.  You should also pay off any accounts that have been sent to collections for late payments or failure to pay.  Once you get all of your accounts current and any old accounts paid off, be sure to keep up with on time payments!  Most credit card companies and other loan companies offer automatic payments at no charge to you.  You should also try to get your balances down.  Credit utilization is another important part of your credit score, and balances that are at or near your credit limit can hurt you.  Ideally, you should try to get your balances to less than 30% of your available credit.


Improve your Score with New Credit

Reestablishing your credit is important.  Some people feel that not having credit cards is a good thing, but this can actually hurt you.  If you don’t have a credit history, it will be difficult to get loans, such as car loans and mortgages, as well as make it difficult to reserve things like rental cars, hotel rooms, and airline tickets.  Credit cards are good things to have IF you use them responsibly and pay them off each month.  Once you have worked to improve your credit score, you should also try to establish new credit, through new credit cards.  Keep these to a minimum though, as every time a credit card company views your credit, your score drops a bit.  If you are unable to get a major credit card, try a store credit card.  They are usually easier to get and often will approve people with limited or poor credit.  If you are unable to get either of these cards, consider a secured credit card.  This card will require you to make a deposit, which typically becomes your credit limit, in order to use the card, but can then be used like a normal credit card to improve your credit and payment history. If you don’t pay your bills, however, the credit card company can withdraw the deposit.

Improving your credit score will not happen overnight, but these tips will help you get on the right track, and slowly but surely, you will see your credit score increase.

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