7 Tips to Improve Your Credit Score

floatinghousePeople are having more problems than ever with their credit scores not just because of the economy – though that has a lion’s share portion in the blame for the trouble – but also because of past debt and difficulties with repayment. Having a bad credit score is frustrating, even frightening at times. There are many quick fixes being advertised now, but what they don’t tell you is that these are extremely likely to backfire and make bad credit even worse. Improving your credit score takes a bit of time, but it is possible with a few things that should be kept in mind.

Watch Your Credit Report

Repairing your credit score starts out with a very basic task – keeping up with the information on your credit report. If you do not look at it, you can’t know how many errors may be on it. Check your credit report at least every three months. Make sure that it doesn’t have any incorrect information, such as listing payments that you made on time as late. Also make sure that the balance owed on each account listed is correct. If you find mistakes, dispute them by contacting the credit bureau. The credit bureau has 30 days to investigate disputed information and prove it correct before the disputed items are removed from your report.

Stabilize your Credit

Work on getting your credit to a stable point. Don’t just allow it to become dormant. If you do not have a credit card, look into acquiring one unless credit cards are the reason your score is low in the first place. If you cannot obtain a regular card, you can apply for a secured credit card – that is, a credit card that requires a deposit of money for you to use it on. Don’t send out a torrent of applications all in one go, though. Credit bureaus look at all inquiries made for opening accounts in your name, not simply the ones that are opened successfully. After you begin sending your payments in reliably and on time, your credit will begin improving. Another way to start stabilifying your credit it by opening a savings account at your bank and add to it each month. Even if you only deposit a small amount, having any kind of savings account will reflect on your responsibility.

Understand Your Debt

Far too many people attempt to ignore their debt because they fear knowing just how bad their situation is. However, debt repayment makes up about 35% of your credit score. Constantly keeping up with the amount that you owe can keep you from accruing too much debt. One good way to keep your debt under control is by adding up the amount of debt that is acceptable for your situation and lifestyle. Add up your total annual income. Most financial advisors recommend that you don’t exceed 25% of that total in debt. For example, if you make $50,000 per year, you should restrict the amount that you owe to $12,500 or less. This is a pretty good guideline, but it isn’t right for everyone. Most individuals are not able to pay even that amount easily. Depending on your situation, it may be wise to keep your debt between 5% and 15% of your annual income.

Bill Payment and Credit Score

While utilities companies are often able to work with people who are having trouble paying, being unable to pay can make your credit score go down – particularly if the company goes so far as to turn it over to collections. Some payment centers, however, are helping people by reporting on-time payments to the credit bureau. Hospital bills can affect your credit score, as well, making them one of the most important varieties of debt to pay down.

Be Smart with Your Credit Cards

Most people have at least one credit card, and on average, more. It seems like a simple convenience, but it is still a huge responsibility. A credit card can do enormous amounts of damage to your credit score. However, they can also be a great weapon against a low score. If you already have a card, pay down the balance on it. Pay off the balance on credit cards that are closest to their limits first, then those with the highest interest rates. You don’t have to stop using your credit cards – getting rid of them completely can actually harm your credit score – but it is important to be smart about when and how they are used. Paying off your balance every month can go miles toward bringing your credit score up. It also provides the added benefit of showing responsibility to future lenders.

Watch All Credit Spending

Keep a close eye on what you spend, especially when credit is involved. When you use credit, don’t spend so much that repaying the full amount will be a burden on your budget. A typical recommendation of financial advisors is to only have as much balance on your credit as you can repay fully within two months. The higher the balance on your credit, the lower your payments are and the more likely you are to end up paying only the interest – likewise, the longer you have a high balance on your credit, the more likely you are to have a situation in which you are unable to make payments. This will cause your credit score to go down even further. Keeping up with payments, however, allows your score to rise and continue rising as you make payments responsibly.

Keep Impeccable Records

Keeping records is important for the safety of your finances as well as your identity. Keep a list of all credit card numbers and phone numbers for the companies providing them and put them in a safe place – in a locking safe, if possible. It is important that you have this information on hand in the event that the card is physically stolen or that you need to dispute any charges that were made fraudulently or without your knowledge.
The fact that your credit score is low does not spell death to your finances. With so many people having credit difficulties, there are also many ways to boost your score – as well as some institutions providing ways around credit completely because of the current widespread troubles. Just a little bit of attention and responsibility can help you get on your way to repairing your credit in no time, though.

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