Improve Credit Score
If you’re looking to improve your credit score, there are some things you should look into:
Take These Steps to Improve Your Credit Score
A credit score reflects credit payment patterns over time, with more emphasis on recent information. You can check your credit report to read a summary of what goes into your credit score.
- Pay your bills on time. Delinquent payments and collections can have a major negative impact on a credit score.
- Keep balances low on credit cards and other “revolving credit.” High outstanding debt can affect a credit score.
- Apply for and open new credit accounts only as needed. Don’t open accounts just to have a better credit mix. It probably won’t improve your credit score.
- Pay off debt rather than moving it around. Also, don’t close unused cards as a short-term strategy to improve your credit score. Owing the same amount but having fewer open accounts may lower your credit score.
- Protect your credit information from fraud and identity theft
Pay Your Bills on Time (and other important tips)
Paying your bills on time is the most important contributor to a good credit score. Even if the debt you owe is a small amount, it is crucial that you make payments on time. In addition, you should:
- Minimize outstanding debt
- Avoid overextending yourself
- Refrain from applying for credit needlessly
Applications for credit show up as inquiries on your credit report. indicating to lenders that you may be taking on new debt. It may be to your advantage to use the credit you already have to prove your ongoing ability to manage credit responsibly.
It Takes Time to Improve Credit Scores
If you have negative information on your credit report, such as late payments, a public record item (e.g., bankruptcy ) or too many inquiries, you may want to pay your bills and wait. Time is your ally in improving your credit scores. There is no quick fix for bad credit scores .
How Changes Affect Scores
One common question involves understanding how very specific actions will affect a credit score. For example, will closing two of your revolving accounts improve your credit score? While this question may appear to be easy to answer, there are many factors to consider.
- Credit scores are based entirely on the information found on an individual’s credit report.
- Any change to the credit report could affect the individual’s credit score.
Simply closing two accounts not only lowers the number of open revolving accounts (which generally will improve credit scores), but it also decreases the total amount of available credit. That results in a higher utilization rate, also called the balance-to-limit ratio (which generally lowers scores).
One change actually affects many items on the credit report. It is impossible to provide a completely accurate assessment of how one specific action will affect a person’s credit score. This is why the credit risk factors provided with your score are important. They identify what elements from your credit history are having the greatest impact so that you can take appropriate action.
How Long Does It Take to Rebuild a Credit Score?
Actually, you don’t rebuild the credit score. You rebuild your credit history. which then is reflected by your
credit score. The length of time to rebuild your credit history after a negative change depends on the reasons behind the change. Most negative changes in credit scores are due to the addition of a negative element to your credit report, such as a delinquency or collection account. These new elements will continue to affect your credit scores until they reach a certain age.
- Delinquencies remain on your credit report for seven years.
- Most public record items remain on your credit report for seven years, although some bankruptcies may remain for 10 years and unpaid tax liens remain for 10 years.
- Inquiries remain on your report for two years.
Create a Positive Credit History
Your credit report shows how well you managed your financial responsibilities during a certain time period. Negative information drops off over time, but the positive information remains. To establish a positive credit history and help improve credit scores:
- Consistently use your complete name. Providing complete, accurate and consistent identification on your credit applications helps set up your credit history correctly from the beginning. It also minimizes the chance that your credit file will be incomplete or mixed with another consumer’s file.
- Pay your bills on time. Most lenders look at the most recent information on a report. So if you’ve paid your accounts on time for the last two to three years, the lender may weigh that more heavily than a series of late payments from five years ago.
- Set up a budget, and live within it. In the age of self-help and empowerment, managing your finances should top your list.
- Review your credit report 60 to 90 days before making a major purchase.
If you begin to fall behind on your payments:
- Contact your lenders. Many will work with you to set up a different payment schedule or interest rate. Ignoring the situation will only add to your problems. It never hurts to ask.
- Pay your bills on time. If you have an overdue bill, an unpaid debt or a tax lien, pay it off. You may find it easier to pay one affordable consolidated loan rather than several accounts.
- Stop using credit until your finances are under control.
- Look to professionals if you need credit help or if you don’t have time to develop your own plan. Quality non-profit credit counseling organizations help consumers understand credit reports, contact creditors, manage debt and set up budgets. You also might find consumer credit help at your local community college or community center.
Become an Educated Consumer
Going to a credit repair clinic will not help improve credit scores. There is nothing any credit repair clinic can legally do for you — including removing inaccurate credit information — that you can’t do for yourself for free, and their fees can be substantial, ranging from hundreds to thousands of dollars.
The Credit Repair Organizations Act is a federal law that prohibits credit repair clinics from taking a consumer’s money until they have fully completed the services they promised. It also requires such firms to provide consumers with a written contract stating all the services to be provided and the terms and conditions of payment. Consumers have three days to withdraw from the contract.